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What changed in FIRST COMMONWEALTH FINANCIAL CORP /PA/'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FIRST COMMONWEALTH FINANCIAL CORP /PA/'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+343 added−350 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-29)

Top changes in FIRST COMMONWEALTH FINANCIAL CORP /PA/'s 2024 10-K

343 paragraphs added · 350 removed · 278 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

86 edited+13 added−15 removed138 unchanged
Biggest changeWe earned approximately $28.6 million in card-related interchange income during the 2023 fiscal year. If we had not qualified for this exemption, we estimate that our interchange income would decrease by $14.9 million. First Commonwealth's total assets exceeded $10 billion as of December 31, 2023, and as such, we are subject to the interchange fee cap beginning July 1, 2024.
Biggest changeAs of December 31, 2023, our total assets exceeded $10.0 billion therefore as of July 1, 2024 we no longer qualify for this exemption. We earned approximately $21.9 million in card-related interchange income during the 2024 fiscal year.
We believe that the type of employees who can help us be successful in that mission have the five core values of: accountability, customer focus, integrity, excellence and inclusion. We have additional leadership points that help define how the leaders of our company will lead us forward.
We believe that the type of employees who can help us be successful in that mission have five core values: accountability, customer focus, integrity, excellence and inclusion. We have additional leadership points that help define how the leaders of our company will lead us forward.
Bank Holding Company Regulation First Commonwealth is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended (“BHC Act”), and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (“FRB”). Acquisitions .
Bank Holding Company Regulation First Commonwealth is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “FRB”). Acquisitions .
The approval of the Pennsylvania Department of Banking and Securities and FDIC is also required for FCB to establish additional branch offices or merge with or acquire another banking institution. Dividends . First Commonwealth is a legal entity separate and distinct from its banking and other subsidiaries.
The approval of the Pennsylvania Department of Banking and Securities and the FDIC is also required for FCB to establish additional branch offices or merge with or acquire another banking institution. Dividends . First Commonwealth is a legal entity separate and distinct from its banking and other subsidiaries.
A bank will be (i) “well capitalized” if the institution has a total risk-based capital ratio of 10.0% or greater, a CET1 capital ratio of 6.5% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a CET1 capital ratio of 4.5% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 4.0% or greater and is not “well capitalized”; (iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8.0%, a CET1 capital ratio less than 4.5%, a Tier 1 risk-based capital ratio of less than 6.0% or a leverage ratio of less than 4.0%; (iv) “significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6.0%, a CET1 capital ratio less than 3%, a Tier 1 risk-based capital ratio of less than 4.0% or a leverage ratio of less than 3.0%; and (v) “critically undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets.
A bank will be (i) “well capitalized” if the institution has a total risk-based capital ratio of 10.0% or greater, a CET1 capital ratio of 6.5% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a CET1 capital ratio of 4.5% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 4.0% or greater and is not “well capitalized”; (iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8.0%, a CET1 capital ratio less than 4.5%, a Tier 1 risk-based capital ratio of less than 6.0% or a leverage ratio of less than 4.0%; (iv) “significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6.0%, a CET1 capital ratio less than 3.0%, a Tier 1 risk-based capital ratio of less than 4.0% or a leverage ratio of less than 3.0%; and (v) “critically undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of the proposed legislation could impact the regulatory structure under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital and modify our business strategy, and limit our ability to pursue business opportunities in an efficient manner.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of any proposed legislation could impact the regulatory structure under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital and modify our business strategy, and limit our ability to pursue business opportunities in an efficient manner.
In October 2023, the Federal Reserve issued a proposal under which the maximum permissible interchange fee for an electronic debit transaction would be the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction. Furthermore, the fraud-prevention adjustment would increase from a maximum of 1 cent to 1.3 cents.
In October 2023, the Federal Reserve issued a proposal under which the maximum permissible interchange fee for an electronic debit transaction would be the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction. Furthermore, the fraud-prevention adjustment would increase from a maximum of 1 cent to 1.3 cents per debit card transaction.
In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted. Among other things, the IRA imposes a new 1% excise tax on the fair market value of stock repurchased after December 31, 2022 by publicly traded U.S. corporations.
In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted. Among other things, the IRA imposes a 1% excise tax on the fair market value of stock repurchased after December 31, 2022 by publicly traded U.S. corporations.
Failure to comply with consumer protection requirements may also result in our failure to obtain any required bank regulatory approval for merger or acquisition transactions we may wish to pursue or our prohibition from engaging in such transactions even if approval is not required.
Failure to comply with consumer protection requirements may also result in our failure to obtain any required bank regulatory approval for merger or acquisition transactions that we may wish to pursue or our prohibition from engaging in such transactions even if approval is not required.
The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
The guidance, which covers all employees that have the 15 Table of Contents ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
In the first quarter of 2022, we entered the equipment leasing and finance business with a division based in the suburban Philadelphia area. 4 Table of Contents Our operating objectives include expansion, diversification within our markets, growth of our fee-based income, and growth internally and through acquisitions of financial institutions, branches, and financial services businesses.
In the first quarter of 2022, we entered the equipment leasing and finance business with a division based in the suburban Philadelphia area. 4 Table of Contents Our operating objectives include expansion, diversification within our markets, growth of our fee-based income, and growth organically and through acquisitions of financial institutions, branches, and financial services businesses.
Our underwriting process for non-owner occupied properties evaluates the history of occupancy, quality of tenants, lease terms, operating expenses and cash flow. Commercial real estate loans are subject to the same credit evaluation as previously described for commercial loans. Approximately 24%, by principal amount, of our commercial real estate loans involve owner-occupied properties.
Our underwriting process for non-owner occupied properties evaluates the history of occupancy, quality of tenants, lease terms, operating expenses and cash flow. Commercial real estate loans are subject to the same credit evaluation as previously described for commercial loans. Approximately 23%, by principal amount, of our commercial real estate loans involve owner-occupied properties.
The current standards are known as the "Basel III Capital Rules." These rules require First Commonwealth and FCB to maintain the following: • A minimum ratio of Common Equity Tier 1 (“CET1”) to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (resulting in a minimum ratio of CET1 to risk-weighted assets of 7.0%); • A minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.5%); • A minimum ratio of total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (resulting in a minimum total capital ratio of 10.5%); and • A minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).
The current standards are known as the "Basel III Capital Rules." These rules require First Commonwealth and FCB to maintain the following: • A minimum ratio of Common Equity Tier 1 (“CET1”) to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (resulting in a minimum ratio of CET1 to risk-weighted assets of 7.0%); • A minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.5%); • A minimum ratio of total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (resulting in a minimum total capital ratio of 10.5%); and 12 Table of Contents • A minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and provide detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.
In October 2023, the Federal Reserve Board, the FDIC and the Office of the Comptroller of the Currency (“OCC”) issued a joint rule to modernize regulations implementing the CRA. Under the final rules, the agencies will evaluate bank performance across the varied activities they conduct and communities in which they operate.
In October 2024, the Federal Reserve Board, the FDIC and the Office of the Comptroller of the Currency (“OCC”) issued a joint rule to modernize regulations implementing the CRA. Under the final rules, the agencies will evaluate bank performance across the varied activities they conduct and communities in which they operate.
Collision insurance policies are required on all automobile loans. The Company also makes other consumer loans, which may or may not be secured. The terms of secured consumer loans generally depend upon the nature of the underlying collateral. Unsecured consumer loans and consumer credit cards usually do not exceed $35 thousand.
Collision insurance policies are required on all automobile loans. The Company also makes other consumer loans, which may or may not be secured. The terms of secured consumer loans generally depend upon the nature of the underlying collateral. Unsecured consumer loans and consumer credit cards usually do not exceed $25 thousand.
Any such data provider would also have to make such data available to third parties, with the consumer’s express authorization and through an interface that satisfies formatting, performance and security standards, for the purpose of such third parties providing the consumer with financial products or services requested by the consumer.
Any such data provider will also have to make such data available to third parties, with the consumer’s express authorization and through an interface that satisfies formatting, performance and security standards, for the purpose of such third parties providing the consumer with financial products or services requested by the consumer.
The special assessment was based on estimated uninsured deposits as of December 31, 2022 (excluding the first $5.0 billion) and will be assessed at a quarterly rate of 3.36 basis points, over eight quarterly assessment periods, beginning in the first quarter of 2024.
The special assessment was based on estimated uninsured deposits as of December 31, 2022 (excluding the first $5.0 billion) and assessed at a quarterly rate of 3.36 basis points over eight quarterly assessment periods, beginning in the first quarter of 2024.
FCB’s uninsured deposits at December 31, 2022 were $2.1 billion, therefore we are not subject to the special assessment at this time. Capital Requirements First Commonwealth and FCB are each required to comply with applicable capital adequacy standards established by the FRB.
FCB’s uninsured deposits at December 31, 2022 were $2.1 billion; therefore we are not subject to the special assessment. Capital Requirements First Commonwealth and FCB are each required to comply with applicable capital adequacy standards established by the FRB.
Under the BHC Act, First Commonwealth is required to obtain the prior approval of the FRB before it can merge or consolidate with any other bank holding company or acquire all or substantially all of the assets of any bank that is not 9 Table of Contents already majority owned by it, or acquire direct or indirect ownership, or control of, any voting shares of any bank that is not already majority owned by it, if after such acquisition it would directly or indirectly own or control more than 5% of the voting shares of such bank.
Under the BHC Act, First Commonwealth is required to obtain the prior approval of the FRB before it can merge or consolidate with any other bank holding company or acquire all or substantially all of the assets of any bank that is not already majority owned by it, or acquire direct or indirect ownership, or control of, any voting shares of any bank that is not already majority owned by it, if after such acquisition it would directly or indirectly own or control more than 5% of the voting shares of such bank.
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF incurred as a result of recent bank failures and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured.
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF incurred as a result of several bank failures and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured.
In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including the NYSE, to implement listing standards that require listed companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including the New York Stock Exchange ("NYSE") to implement listing standards that require listed companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
The Company’s general policy for commercial real estate loans is to limit the terms of the loans to not more than 10 years with loan-to-value ratios not exceeding 80% on owner-occupied and income producing properties.
The Company’s general policy for commercial real estate loans is to limit the terms of the loans to not more than seven years with loan-to-value ratios not exceeding 80% on owner-occupied and income producing properties.
Interchange fees, or “swipe” fees, are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Under the final rules, the maximum permissible interchange fee is equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit interchange transactions.
Interchange fees, or “swipe” fees, are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Under the final rules, the maximum permissible interchange fee is equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit 14 Table of Contents interchange transactions.
While to date we have not experienced a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our 16 Table of Contents customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future.
While to date we have not experienced a significant compromise, a significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future.
In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023.
In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules uniformly by two basis points beginning with the first quarterly assessment period of 2023.
They receive healthy living emails and resources with helpful wellness tips, success stories, and inspirations to guide them on their own wellness journeys. A Concierge Care program is available to help 8 Table of Contents healthcare members navigate the complexities of healthcare. They work to coordinate care needs with doctors, caregivers and pharmacists.
They receive healthy living emails and resources with helpful wellness tips, success stories, and inspirations to guide them on their own wellness journeys. A Concierge Care program is available to help healthcare members navigate the complexities of healthcare. They work to coordinate care needs with doctors, caregivers and pharmacists.
An institution’s CRA rating is considered in determining whether to grant charters, branches and other deposit facilities, relocations, mergers, consolidations and acquisitions. Performance less than satisfactory may be the basis for denying an application. For its most recent examination, FCB received a “satisfactory” rating.
An institution’s CRA rating is considered in determining whether to grant charters, branches and other deposit facilities, relocations, mergers, consolidations and acquisitions. Performance that is less than satisfactory may be the basis for denying an application. For its most recent performance evaluation, FCB received a “satisfactory” rating.
At December 31, 2023, uninsured deposits totaled 27% of the total deposit portfolio. Competition The banking and financial services industry is extremely competitive in our market area.
At December 31, 2024, uninsured deposits totaled 27% of the total deposit portfolio. Competition The banking and financial services industry is extremely competitive in our market area.
Until the financial holding company returns to compliance, the FRB may impose limitations or conditions on the conduct of its activities, and the company may not commence any of the broader financial activities permissible for financial holding companies or acquire a company engaged in such financial activities without prior approval of the FRB.
Until the financial holding company returns to compliance, the FRB may impose limitations or conditions on the conduct of its activities, and the company may not commence any of the broader financial activities permissible for financial holding companies or acquire a company engaged in such 9 Table of Contents financial activities without prior approval of the FRB.
In general, any such transaction by FCB (or its subsidiaries) must be limited to certain thresholds on an individual and aggregate basis and, for credit transactions with any affiliate, must be secured by designated amounts of specified collateral. 10 Table of Contents SEC Regulations .
In general, any such transaction by FCB (or its subsidiaries) must be limited to certain thresholds on an individual and aggregate basis and, for credit transactions with any affiliate, must be secured by designated amounts of specified collateral. SEC Regulations .
We practice a Customer Service Promise of five critical behaviors that we encourage every one of our employees to demonstrate at every customer interaction – internal or external – with the intent of creating an extraordinary customer experience, which is measured by our customer satisfaction scores.
We practice a Customer Service Promise of five critical behaviors that we encourage every one of our employees to demonstrate at every customer interaction – internal or external – with the intent of creating an extraordinary customer experience, as measured by our customer satisfaction scores.
The NYSE's listing standards pursuant to the SEC's rule became effective on October 2, 2023. We adopted a compensation recovery policy pursuant to the NYSE listing standards on October 24, 2023. The policy is included as Exhibit 97.1 to this Form 10-K. Cybersecurity In March 2015, federal regulators issued two related statements regarding cybersecurity.
The NYSE's listing standards pursuant to the SEC's rule became effective on October 2, 2023. We adopted a compensation recovery policy pursuant to the NYSE listing standards on October 24, 2023. The policy was in September 2024 and is included as Exhibit 97.1 to this Form 10-K. Cybersecurity In March 2015, federal regulators issued two related statements regarding cybersecurity.
Home equity lines of credit and other home equity loans are originated by the Company for typically up to 90% of the appraised value, less the amount of any existing prior liens on the property. Additionally, the Company’s credit policy requires borrower FICO scores of not less than 661 and a debt-to-income ratio of not more than 43%.
Home equity lines of credit and other home equity loans are originated by the Company for typically up to 90% of the appraised value, less the amount of any existing prior liens on the property. Additionally, the Company’s credit policy requires borrower FICO scores of not less than 680 and a debt-to-income ratio of not more than 45%.
A change in applicable statutes, regulations or regulatory policy may have a material adverse effect on our business, financial condition or results of operations.
A change in applicable statutes, regulations or regulatory policies may have a material adverse effect on our business, financial condition or results of operations.
Federal bank regulators, state attorneys general and 11 Table of Contents state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights, action by the state and local attorneys general in each jurisdiction in which we operate and civil money penalties.
Federal bank regulators, state attorneys general and state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights, action by the state and local attorneys general in each jurisdiction in which we operate and civil money penalties.
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations. 15 Table of Contents Office of Foreign Assets Control Regulation The U.S.
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations. Office of Foreign Assets Control Regulation The U.S.
In order for a financial holding company to commence any new activity permitted by the BHC Act or to acquire a company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least satisfactory in its most recent examination under the CRA.
In order for a financial holding company to commence any new activity permitted by the BHC Act or to acquire a company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least satisfactory in its most recent CRA performance evaluation.
First Commonwealth believes that, as of December 31, 2023, FCB was a “well-capitalized” bank as defined by the FDIA.
First Commonwealth believes that, as of December 31, 2024, FCB was a “well-capitalized” bank as defined by the FDIA.
Under the final rule, the estimated loss pursuant to the systemic risk determination will be periodically adjusted, and the FDIC has retained the ability to cease collection early, extend the special assessment collection period and 12 Table of Contents impose a final shortfall special assessment on a one-time basis.
Under the final rule, the estimated loss pursuant to the systemic risk determination will be periodically adjusted, and the FDIC has retained the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment on a one-time basis.
An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters.
An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain 13 Table of Contents matters.
Our overall rating exceeded that of the financial services industry and all companies that utilize our survey provider. The survey reflected that employees have fulfillment in working for a community bank and making a difference. They are satisfied with their jobs and First Commonwealth as a whole.
Our overall rating was aligned with the financial services industry and 7 Table of Contents exceeded all companies that utilize our survey provider in the USA. The survey reflected that employees have fulfillment in working for a community bank and making a difference. They are satisfied with their jobs and First Commonwealth as a whole.
Bank Regulation FCB is a state bank chartered under the Pennsylvania Banking Code and is not a member of the FRB. As such, FCB is subject to the supervision of, and is regularly examined by, both the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking and Securities and is required to furnish quarterly reports to both agencies.
Bank Regulation FCB is a state bank chartered under the Pennsylvania Banking Code and is not a member of the FRB. As such, FCB is subject to the supervision of, and is regularly examined by, both the FDIC and the Pennsylvania Department of Banking and Securities and is required to furnish quarterly reports to both agencies.
The proposal would adopt an approach for future adjustments to the interchange fee cap, which would occur every other year based on issuer cost data gathered by the Federal Reserve from large debit card issuers.
The proposal would adopt an approach for future adjustments to the interchange fee cap, which would occur every other year based on issuer cost data gathered by the Federal Reserve from large debit card issuers. The comment period for this proposal ended in May 2024.
At December 31, 2023, the Bank operated 126 community banking offices in 30 counties throughout western and central Pennsylvania and throughout Ohio, as well as commercial lending operations in Harrisburg, Pennsylvania, and Canton, Cleveland, Columbus, Canfield and Hudson, Ohio. The Bank also operates a network of 138 automated teller machines, or ATMs, at various branch offices and offsite locations.
At December 31, 2024, the Bank operated 124 community banking offices in 30 counties throughout western and central Pennsylvania and throughout Ohio, as well as commercial lending operations in Canton, Columbus, Canfield, Hudson and Independence, Ohio. The Bank also operates a network of 132 automated teller machines, or ATMs, at various branch offices and offsite locations.
Our Chief Executive Officer has certified to the New York Stock Exchange (“NYSE”) that, as of the date of the certification, he was not aware of any violation by First Commonwealth of NYSE’s corporate governance listing standards.
Our Chief Executive Officer has certified to the NYSE that, as of the date of the certification, he was not aware of any violation by First Commonwealth of NYSE’s corporate governance listing standards.
Unsecured consumer loans usually have a term of no longer than 36 months. Deposits Deposits are our primary source of funds to support our revenue-generating assets. We offer traditional deposit products to businesses and other customers with a variety of rates and terms. Deposits at our bank are insured by the FDIC up to statutory limits.
Unsecured consumer loans usually have a term of no longer than 36 months. Deposits Deposits are our primary source of funds to support our revenue-generating assets. We offer traditional deposit products to businesses and other customers with a variety of rates and terms.
The compensation components of First Commonwealth’s total rewards are designed to provide competitive pay that aligns with individual and company performance as well as stakeholder interests. Employee benefits plans support employees with insurance, retirement and work/life plans.
To do so, we leverage a total rewards strategy that leverages cash and non-cash components. The compensation components of First Commonwealth’s total rewards are designed to provide competitive pay that aligns with individual and company performance as well as stakeholder interests. Employee benefits plans support employees with insurance, retirement and work/life plans.
We also provide trust and wealth management services through FCB and offer insurance products through FCIA. At December 31, 2023, we had total assets of $11.5 billion, total loans of $9.0 billion, total deposits of $9.2 billion and shareholders’ equity of $1.3 billion.
We also provide trust and wealth management services through FCB and offer insurance products through FCIA. At December 31, 2024, we had total assets of $11.6 billion, total loans of $9.0 billion, total deposits of $9.7 billion and shareholders’ equity of $1.4 billion.
In October 2023, the CFPB proposed a new rule that would require a provider of payment accounts or products, such as a bank, to make data available to consumers upon request regarding the products or services they obtain from the provider.
In October 2024, the CFPB issued a final rule that will require a provider of payment accounts or products, such as a bank, to make data available to consumers upon request regarding the products or services they obtain from the provider.
As of December 31, 2023, FCB could pay dividends to First Commonwealth of $282.6 million without reducing its capital levels below "well capitalized" levels and without the approval of the Pennsylvania Department of Banking and Securities. Community Reinvestment .
As of December 31, 2024, FCB could pay dividends to First Commonwealth of $333.0 million without reducing its capital levels below "well capitalized" levels and without the approval of the Pennsylvania Department of Banking and Securities. 10 Table of Contents Community Reinvestment .
Having crossed the $10 billion asset threshold in 2023, assessment rates for future periods will be calculated using a scorecard that combines the supervisory risk ratings of the institution with certain forward-looking financial measures.
Having crossed the $10 billion asset threshold in 2023, beginning in 2024 our assessment rates are calculated using a scorecard that combines the supervisory risk ratings of the institution with certain forward-looking financial measures.
To recognize employees who go above and beyond in their volunteerism and community engagement, we present a quarterly “Golden Tower” award which includes $1,000 for the recipient to give to a charitable organization of their choice.
We had 177 of our employees use 991 Community Commitment hours, a 23% increase over 2023. To recognize employees who go above and beyond in their volunteerism and community engagement, we present a quarterly “Golden Tower” award which includes $1,000 for the recipient to give to a charitable organization of their choice.
We provide corporate support for the United Way, including an employee campaign which exceeded our 2023 goal with employee contributions of $95,500. With the company match, a total of $191,000 was donated to United Way chapters throughout our footprint.
We provide corporate support for the United Way, including an employee campaign that exceeded our 2024 goal with employee contributions of $93,385. With the company match, a total of $190,000 was donated to United Way chapters throughout our footprint.
Human Capital Resources Workforce Composition and Demographics At December 31, 2023, First Commonwealth and its subsidiaries employed 1,437 full-time employees and 67 part-time employees with 707 exempt and 797 non-exempt employees. The average age of the workforce is 44.4 years and the average tenure is 7.9 years. Our workforce is 67% female.
Human Capital Resources Workforce Composition and Demographics At December 31, 2024, First Commonwealth and its subsidiaries employed 1,485 full-time employees and 60 part-time employees with 707 exempt and 838 non-exempt employees. The average age of the workforce is 43.9 years and the average tenure is 7.9 years. Our workforce is 67% female. Approximately 29% of our workforce is telecommuting.
At December 31, 2023, we held $9.2 billion of total deposits, which consisted of $2.4 billion, or 26%, in non-interest bearing checking accounts, $5.5 billion, or 60%, in interest-bearing checking accounts, money 6 Table of Contents market and savings accounts, and $1.3 billion, or 14%, in CDs and IRAs.
At December 31, 2024, we held $9.7 billion of total deposits, which consisted of $2.2 billion, or 23%, in non-interest bearing checking accounts, $5.7 billion, or 6 Table of Contents 59%, in interest-bearing checking accounts, money market and savings accounts, and $1.8 billion, or 18%, in CDs and IRAs.
First National Bank of Indiana changed its name to National Bank of the Commonwealth in 1971 and became a subsidiary of First Commonwealth in 1983.
Historical and Recent Developments FCB began in 1934 as First National Bank of Indiana. First National Bank of Indiana changed its name to National Bank of the Commonwealth in 1971 and became a subsidiary of First Commonwealth in 1983.
Data that would be required to be made available under the rule would include transaction information, account balance, account and routing numbers, terms and conditions, upcoming bill information, and certain account verification data.
Data that must be made available under the rule will 11 Table of Contents include transaction information, account balance, account and routing numbers, terms and conditions, upcoming bill information, and certain account verification data.
The Bank is also a member of the “Freedom ATM Alliance,” which affords cardholders surcharge-free access to a network of over 350 ATMs in over 50 counties in Pennsylvania, Maryland, New York, and Ohio. Historical and Recent Developments FCB began in 1934 as First National Bank of Indiana.
The Bank is also a member of the Allpoint ATM network, which allows surcharge-free access to over 55,000 ATMs and the “Freedom ATM Alliance,” which affords cardholders surcharge-free access to a network of over 350 ATMs in over 50 counties in Pennsylvania, Maryland, New York, and Ohio.
Within our retail unit, we provide a career development program for entry level employees to help them achieve positions of increased opportunity. Leaders are given industry-specific training as well as development opportunities to understand their strengths and improve coaching and execution skills. Lastly, we invest in an established, industry-specific and developmental training course library from which all employees benefit.
Within our retail unit, we provide training for entry-level employees to help them achieve success in their role and prepare them for positions of increased opportunity. Leaders are given industry-specific training as well as development opportunities to understand their strengths and improve coaching and execution skills.
The relevant 13 Table of Contents capital measures are the total capital ratio, the CET1 capital ratio (a new ratio requirement under the Basel III Capital Rules), the Tier 1 capital ratio and the leverage ratio.
The relevant capital measures are the total capital ratio, the CET1 capital ratio (an additional ratio requirement under the Basel III Capital Rules), the Tier 1 capital ratio and the leverage ratio.
Future Legislation and Regulation Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states.
We will continue to monitor and evaluate the impact of future regulatory actions related to ESG matters. 16 Table of Contents Future Legislation and Regulation Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states.
FCB will no longer be exempt from the Volcker Rule beginning January 1, 2024, however this will not significantly impact our operations as we do not participate in the businesses prohibited by the Volcker Rule.
FCB's total assets exceeded $10 billion as of December 31, 2023. FCB was no longer exempt from the Volcker Rule beginning January 1, 2024, however this does not significantly impact our operations as we do not participate in the businesses prohibited by the Volcker Rule.
Our health plan is structured with a tiered premium approach in which 32% of plan participants are in the lowest tier and pay a lower monthly premium than the other two higher paying tiers. Our 401k plan offers an employer match on employee contributions of up to 4% of eligible earnings.
Our health plan is structured with a tiered premium approach in which 28% of plan participants are in the lowest tier and pay a lower monthly premium than the other two higher paying tiers.
Deposit insurance assessments are based upon average total assets minus average total equity. The insurance assessments are based upon a matrix that takes into account a bank’s capital level and supervisory rating.
Deposits of FCB are insured up to applicable limits by the FDIC and are subject to deposit insurance assessments to maintain the Deposit Insurance Fund (“DIF”). Deposit insurance assessments are based upon average total assets minus average total equity. The insurance assessments are based upon a matrix that takes into account a bank’s capital level and supervisory rating.
More than 50% of that giving is Community Reinvestment Act ("CRA") eligible, which means that it is directed into low to moderate income communities where we anticipate it is needed the most.
More than 50% of that giving is Community Reinvestment Act ("CRA") eligible, which means that it is directed to low to moderate income communities where we anticipate it is needed the most. Our employees volunteered for more than 16,755 service hours in 2024, which is a 23% increase from the prior year.
We price our deposit products with a view to maximizing our share of each customer’s financial services business and prudently managing our cost of funds.
Deposits at our bank are insured by the Federal Deposit Insurance Corporation (the "FDIC") up to statutory limits. We price our deposit products with a view to maximizing our share of each customer’s financial services business and prudently managing our cost of funds.
We support our employees by offering several resources. An employee assistance program connects employees with resources to help them in certain life situations, such as personal counselling, legal services, and adoption.
Health and Safety We continue to prioritize the safety and well-being of our employees, customers, partners and communities through healthy workplace practices and consistent communication reminders and updates. We support our employees by offering several resources. An employee assistance program connects employees with resources to help them in certain life situations, such as personal counselling, legal services, and adoption.
The Dodd-Frank Act contained an exemption from the interchange fee cap for any debit card issuer that, together with its affiliates, has total assets of less than $10 billion as of the end of the previous calendar year. As of December 31, 2022, we qualified for this exemption.
The extent to which any such proposed changes in permissible interchange fees will impact our future revenues is currently uncertain. The Dodd-Frank Act contained an exemption from the interchange fee cap for any debit card issuer that, together with its affiliates, has total assets of less than $10 billion as of the end of the previous calendar year.
See Note 24 “Regulatory Restrictions and Capital Adequacy” of Notes to the Consolidated Financial Statements, contained in Item 8, for a table that provides a comparison of First Commonwealth’s and FCB’s risk-based capital ratios and the leverage ratio to minimum regulatory requirements. 14 Table of Contents The Volcker Rule The Dodd-Frank Act prohibits banks and their affiliates from engaging in proprietary trading and investing in and sponsoring hedge funds and private equity funds (so called "covered funds").
See Note 25 “Regulatory Restrictions and Capital Adequacy” of Notes to the Consolidated Financial Statements, contained in Item 8, for a table that provides a comparison of First Commonwealth’s and FCB’s risk-based capital ratios and the leverage ratio to minimum regulatory requirements.
In January 2023, we acquired Centric Financial Corporation ("Centric") and its banking subsidiary Centric Bank, which operated branches located in Harrisburg, Hershey, Mechanicsburg, Camp Hill, Doylestown, Devon, and Lancaster, Pennsylvania, and loan production offices in Lancaster and Devon, Pennsylvania. We have also focused on organic growth, improving the reach of our franchise and the breadth of our product offering.
In January 2023, we acquired Centric Financial Corporation ("Centric") and its banking subsidiary Centric Bank, which operated branches located in Harrisburg, Hershey, Mechanicsburg, Camp Hill, Doylestown, Devon, and Lancaster, Pennsylvania, and loan production offices in Lancaster and Devon, Pennsylvania. In December 2024, we entered into an agreement to acquire CenterGroup Financial Inc.
The proposed rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products or services. Deposit Insurance . Deposits of FCB are insured up to applicable limits by the FDIC and are subject to deposit insurance assessments to maintain the Deposit Insurance Fund (“DIF”).
The rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products or services. FCB will be required to comply with this rule beginning April 1, 2027.
All of our ATMs are part of the NYCE and MasterCard/Cirrus networks, both of which operate nationwide. The Bank is a member of the Allpoint ATM network, which allows surcharge-free access to over 55,000 ATMs.
All of our ATMs are part of the NYCE and MasterCard/Cirrus networks, both of which operate nationwide.
As part of this strategy, we have opened fourteen de novo branches since 2005, all of which were in the greater Pittsburgh area.
("CGFI") and its banking subsidiary, CenterBank, which operates in the Cincinnati market. We have also focused on organic growth, improving the reach of our franchise and the breadth of our product offering. As part of this strategy, we have opened fourteen de novo branches since 2005, all of which were in the greater Pittsburgh area.
Our focus on D&I has produced meaningful progress in several scorecard categories. As of December 31, 2023, racial minorities comprised 8% of the workforce. Racial minorities and women comprised 4.8% and 50.2%, respectively of those in leadership positions (defined by corporate title Assistant Vice President and higher). Women, including one racial minority, hold three seats on our Board of Directors.
People of color and women comprised 4.3% and 50.3%, respectively, of those in leadership positions (defined by corporate title Assistant Vice President and higher). Women, including one person of color, hold four seats on our Board of Directors.
The statutory provision is commonly called the “Volcker Rule.” Banks with less than $10 billion in total consolidated assets are exempt from the Volcker Rule. FCB's total assets exceeded $10 billion as of December 31, 2023.
The Volcker Rule The Dodd-Frank Act prohibits banks and their affiliates from engaging in proprietary trading and investing in and sponsoring hedge funds and private equity funds (so called "covered funds"). The statutory provision is commonly called the “Volcker Rule.” Banks with less than $10 billion in total consolidated assets are exempt from the Volcker Rule.
The sessions are informative and collaborative and valued by the participants. Since 2009, we’ve supported a mentorship program, open to all employees. The program provides 1:1 mentorship pairings, group development sessions and volunteer opportunities. In 2023, there were a total of 140 participants, including 94 women and 10 racial minorities.
Our SAIL program provides opportunities for information sharing, collaboration, and learning. Since 2009, we have supported a mentorship program that is open to all employees. The program provides 1:1 mentorship pairings, group development sessions and volunteer opportunities. In 2024, a total of 144 participants participated in the program, including 104 women and 10 people of color.
Patricia Husic was recognized by City & State Pennsylvania with their Power of Diversity recognition. T. Michael Price, CEO, received the PA Bankers Association Diversity, Equity & Inclusion Changemaker Award. 7 Table of Contents Talent Attraction and Retention Our employees are key to the success of delivering our mission as an organization and achieving our financial targets.
Talent Attraction and Retention Our employees are key to the success of delivering our mission as an organization and achieving our financial targets.
In 2023 we extended our Community Commitment Hours program, which allows for eight hours of paid time off to use toward eligible volunteer opportunities. During this inaugural year, 923 hours were used by 115 employees.
Our employees also participated in 435 financial education hours with 56% of those hours reaching our neighbors in low-to-moderate income communities, which is a 6% increase over 2023. The year 2024 was the second year for our Community Commitment Hours program, which allows for eight hours of paid time off that employees can use toward eligible volunteer opportunities.
We offer a variety of other benefits, including life insurance and disability plans, a generous paid-time off policy and a wide array of voluntary plan options. Health and Safety We continue to prioritize the safety and well-being of our employees, customers, partners and communities through healthy workplace practices and consistent communication reminders and updates.
Our 401k plan offers an employer match on employee contributions of up to 4% of eligible earnings which will change to up to 5% of eligible earnings starting in January 2025. We offer a variety of other benefits, including life insurance and disability plans, a generous paid-time off policy and a wide array of voluntary plan options.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeGeneral market fluctuations, including real or anticipated changes in the strength of the economy; industry factors and general economic and political conditions and events, such as economic slowdowns or recessions; and interest rate changes, oil price volatility or credit loss trends could also cause our stock price to decrease regardless of operating results.
Biggest changeOur stock price could also decrease regardless of operating results as a result of: (i) general market fluctuations, including real or anticipated changes in the strength of the economy; (ii) industry factors and general economic and political conditions and events, such as economic slowdowns or recessions; and (iii) interest rate changes, oil price volatility or credit loss trends. 24 Table of Contents Changes in Accounting Standards Could Materially Impact Our Financial Statements From time to time, accounting standards setters change the financial accounting and reporting standards that govern the preparation of our financial statements.
In developing and marketing new lines of business and/or new products and services we invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible.
We invest significant time and resources in developing and marketing new lines of business and/or new products and services we invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible.
In addition, our implementation of certain new technologies, such as those related to artificial intelligence and algorithms, in our business processes may have unintended consequences due to their limitations or our failure to use them effectively. Cloud technologies are also critical to the operation of our systems, and our reliance on cloud technologies is growing.
In addition, our implementation of certain new technologies in our business processes, such as those related to artificial intelligence and algorithms, may have unintended consequences due to their limitations or our failure to use them effectively. Cloud technologies are also critical to the operation of our systems, and our reliance on cloud technologies is growing.
Our technologies, systems, networks and our clients’ devices have been subject to, and are likely to continue to be the target of, cyber-attacks, computer viruses, malicious code, phishing attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential, proprietary and other information, the theft of client assets through fraudulent transactions or disruption of our or our clients’ or other third parties’ business operations.
Our technologies, systems, networks and our clients’ devices have been subject to, and are likely to continue to be the target of, cyber-attacks, computer viruses, malicious code, phishing attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential, proprietary and other information, the theft of client assets through fraudulent transactions or the disruption of our or our clients’ or other third parties’ business operations.
Our stock price can fluctuate significantly in response to a variety of factors including, among other things, (i) actual or anticipated variations in quarterly results of operations; (ii) recommendations by securities analysts; (iii) operating and stock price performance of other companies that investors deem comparable to us; (iv) news reports relating to trends, concerns and 24 Table of Contents other issues in the financial services industry; (v) perceptions in the marketplace regarding us and/or our competitors; (vi) new technology used, or services offered, by competitors; (vii) the issuance by us of additional securities, including common stock and securities that are convertible into or exchangeable for, or that represent the right to receive, common stock; (viii) sales of a large block of shares of our common stock or similar securities in the market after an equity offering, or the perception that such sales could occur; (ix) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; (x) failure to integrate acquisitions or realize anticipated benefits from acquisitions; (xi) changes in government regulations; and (xii) geopolitical conditions such as acts or threats of terrorism or military conflicts.
Our stock price can fluctuate significantly in response to a variety of factors including, among other things: (i) actual or anticipated variations in quarterly results of operations; (ii) recommendations by securities analysts; (iii) operating and stock price performance of other companies that investors deem comparable to us; (iv) news reports relating to trends, concerns and other issues in the financial services industry; (v) perceptions in the marketplace regarding us and/or our competitors; (vi) new technology used, or services offered, by competitors; (vii) the issuance by us of additional securities, including common stock and securities that are convertible into or exchangeable for, or that represent the right to receive, common stock; (viii) sales of a large block of shares of our common stock or similar securities in the market after an equity offering, or the perception that such sales could occur; (ix) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; (x) failure to integrate acquisitions or realize anticipated benefits from acquisitions; (xi) changes in government regulations; and (xii) geopolitical conditions such as acts or threats of terrorism or military conflicts.
We Are Subject to Risk Arising from Failure or Circumvention of Our Controls and Procedures Our internal controls, disclosure controls and procedures, and corporate governance policies and procedures are based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
We Are Subject to Risk Arising from Failure or Circumvention of Our Controls and Procedures Our internal controls, disclosure controls and procedures, and corporate governance policies and procedures are based in part on certain assumptions and can provide only reasonable, but not absolute, assurances that the objectives of the system are met.
As more fully discussed in Part II, Item 8, Financial Statements and Supplementary Data-Note 24, Regulatory Restrictions and Capital Adequacy, which is located elsewhere in this report, the ability of First Commonwealth to declare or pay dividends on its common stock may also be subject to certain restrictions in the event that First Commonwealth elects to defer the payment of interest on its junior subordinated debt securities.
As more fully discussed in Part II, Item 8, Financial Statements and Supplementary Data-Note 25, Regulatory Restrictions and Capital Adequacy, which is located elsewhere in this report, the ability of First Commonwealth to declare or pay dividends on its common stock may also be subject to certain restrictions in the event that First Commonwealth elects to defer the payment of interest on its junior subordinated debt securities.
Changes in The Federal, State or Local Tax Laws May Negatively Impact Our Financial Performance and We Are Subject to Examinations and Challenges by Tax Authorities We are subject to federal and applicable state tax laws and regulations.
Changes in Federal, State or Local Tax Laws May Negatively Impact Our Financial Performance and We Are Subject to Examinations and Challenges by Tax Authorities We are subject to federal and applicable state tax laws and regulations.
In addition, bank regulatory agencies periodically review our allowance for credit losses and may require an increase in the provision for credit losses or the recognition of additional loan charge-offs, based on judgments different than those of management.
In addition, bank regulatory agencies periodically review our allowance for credit losses and may require an increase in the provision for credit losses or the recognition of additional loan charge-offs, based on judgments different from those of management.
Nonetheless, our access to liquidity sources could be affected by unrealized losses if securities must be sold at a loss; tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses; the Federal Home Loan Bank of Pittsburgh ("FHLB") or other funding sources reduce capacity; or bank regulators impose restrictions on us that impact the level of interest rates we may pay on deposits or our ability to access brokered deposits.
Nonetheless, our access to liquidity sources could be affected by unrealized losses if: (i) securities must be sold at a loss; (ii)tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses; (iii)the Federal Home Loan Bank of Pittsburgh ("FHLB") or other funding sources reduce capacity; or (iv) bank regulators impose restrictions on us that impact the level of interest rates we may pay on deposits or our ability to access brokered deposits.
Risks Related to Acquisition Activity Potential Acquisitions May Disrupt Our Business and Dilute Stockholder Value We generally seek merger or acquisition partners that are culturally similar and have experienced management and possess either significant market presence or have potential for improved profitability through financial management, economies of 22 Table of Contents scale or expanded services.
Risks Related to Acquisition Activity Potential Acquisitions May Disrupt Our Business and Dilute Stockholder Value We generally seek merger or acquisition partners that are culturally similar and have experienced management and possess either significant market presence or have potential for improved profitability through financial management, economies of scale or expanded services.
Provisions of Our Articles of Incorporation, Bylaws and Pennsylvania Law, as Well as State and Federal Banking Regulations, Could Delay or Prevent a Takeover of Us by a Third Party Provisions in our articles of incorporation and bylaws, the corporate law of the Commonwealth of Pennsylvania, and state and federal regulations could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our shareholders, 23 Table of Contents or otherwise adversely affect the price of our common stock.
Provisions of Our Articles of Incorporation, Bylaws and Pennsylvania Law, as Well as State and Federal Banking Regulations, Could Delay or Prevent a Takeover of Us by a Third Party Provisions in our articles of incorporation and bylaws, the corporate law of the Commonwealth of Pennsylvania, and state and federal regulations could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our shareholders, or otherwise adversely affect the price of our common stock.
An Investment in Our Common Stock Is Not an Insured Deposit Our common stock is not a bank deposit and, therefore, is not insured against loss by the Federal Deposit Insurance Corporation (FDIC), any other deposit insurance fund or by any other public or private entity.
An Investment in Our Common Stock Is Not an Insured Deposit Our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity.
If this were to happen, the market price of our common stock could decline significantly, and you could lose all or part of your investment. 17 Table of Contents Risks Related To Our Business Interest Rate Risks We Are Subject to Interest Rate Risk Our earnings and cash flows are largely dependent upon our net interest income.
If this were to happen, the market price of our common stock could decline significantly, and you could lose all or part of your investment. Risks Related To Our Business Interest Rate Risks We Are Subject to Interest Rate Risk Our earnings and cash flows are largely dependent upon our net interest income.
Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section captioned “Net Interest Income” and Item 7A. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report for further discussion related to interest rate sensitivity and our management of interest rate risk.
Management’s Discussion and Analysis of Financial Condition and Results of Operations under the 17 Table of Contents section captioned “Net Interest Income” and Item 7A. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report for further discussion related to interest rate sensitivity and our management of interest rate risk.
The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. 21 Table of Contents Our Operations Rely On Certain External Vendors We rely on certain vendors to provide products and services necessary to maintain the day-to-day operations of First Commonwealth and FCB.
The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. Our Operations Rely On Certain External Vendors We rely on certain vendors to provide products and services necessary to maintain the day-to-day operations of First Commonwealth and FCB.
Accordingly, our operations are exposed to the risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements.
Accordingly, our operations are exposed to the risk that these vendors will not perform in accordance with the contractual arrangements under service level agreements.
The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor’s organizational structure, financial condition, support for existing products and services or strategic focus or for any other reason, could be disruptive to First Commonwealth’s operations and financial reporting, which could have a material adverse effect on First Commonwealth’s business and, in turn, First Commonwealth’s financial condition and results of operations.
The failure of an external vendor to perform in accordance with the contractual arrangements under service level agreements, whether due to changes in the vendor’s organizational structure, financial condition, support for existing products and services or strategic focus or for any other reason, could be disruptive to First Commonwealth’s operations and financial reporting, which could have a material adverse effect on First Commonwealth’s business and, in turn, First Commonwealth’s financial condition and results of operations.
In the normal course of business, we are routinely subject to examinations and challenges from federal and applicable state tax authorities regarding the amount of taxes due in connection with investments we have made and the businesses in which we have engaged. Recently, federal and state taxing authorities have become increasingly aggressive in challenging tax positions taken by financial institutions.
In the normal course of business, we are routinely subject to examinations and challenges from federal and applicable state tax authorities regarding the amount of taxes due in connection with investments we have made and the businesses in which we have engaged. Federal and state taxing authorities have been aggressive in challenging tax positions taken by financial institutions.
Furthermore, notwithstanding the proliferation of technology and technology-based risk and control systems, our businesses ultimately rely on people as our greatest resource, and, from time-to-time, they make mistakes or engage in violations of applicable policies, laws, rules or procedures that are not always caught immediately by our technological processes or by our controls and other procedures, which are intended to prevent and detect such errors or violations.
Furthermore, notwithstanding the proliferation of technology and technology-based risk and control systems, our businesses ultimately rely on people as our greatest resource, who from time to time, make mistakes or engage in violations of applicable policies, laws, rules or procedures that are not always caught 19 Table of Contents immediately by our technological processes or by our controls and other procedures, all of which are intended to prevent and detect such errors or violations.
In particular, we contracted with an external vendor for our core processing system used to maintain customer and account records, reflect account transactions and activity, and support our customer relationship management systems for substantially all of our deposit and loan customers.
In particular, we contract with an external vendor for our core processing system, which is used to maintain customer and account records, reflect account transactions and activity, and support our customer relationship management systems for substantially all of our deposit and loan customers.
Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations. The Value of Our Goodwill and Other Intangible Assets May Decline in the Future As of December 31, 2023, we had $386.5 million of goodwill and other intangible assets.
Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations. The Value of Our Goodwill and Other Intangible Assets May Decline in the Future As of December 31, 2024, we had $383.4 million of goodwill and other intangible assets.
We Are Subject to Risk Arising from Conditions in the Commercial Real Estate Market As of December 31, 2023, commercial real estate mortgage loans comprised approximately 34% of our loan portfolio.
We Are Subject to Risk Arising from Conditions in the Commercial Real Estate Market As of December 31, 2024, commercial real estate mortgage loans comprised approximately 35% of our loan portfolio.
Even the most well protected information, networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
Even well protected information, networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques used in such attempts are constantly evolving, including as a result of artificial intelligence, and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
Management's Discussion and Analysis of Financial Condition and Results of Operations elsewhere in this report for further information regarding pending accounting standards updates. We May Not Be Able to Attract and Retain Skilled People Our success depends, in large part, on our ability to attract and retain key people.
See New Accounting Pronouncements at the end of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations elsewhere in this report for further information regarding pending accounting standards updates. We May Not Be Able to Attract and Retain Skilled People Our success depends, in large part, on our ability to attract and retain key people.
The allowance, in the judgment of management, is appropriate to reserve for estimated loan losses and risks inherent in the loan portfolio. The level of the allowance for credit losses reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic conditions and unidentified losses in the current loan portfolio.
The level of the allowance for credit losses reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic conditions and unidentified losses in the current loan portfolio.
The process for obtaining these required regulatory approvals has become substantially more difficult since the global financial crisis, and our ability to engage in certain merger or acquisition transactions depends on the bank regulators' views at the time as to our capital levels, quality of management, and overall condition, in addition to their assessment of a variety of other factors, including our compliance with law.
Our ability to engage in certain merger or acquisition transactions depends on the bank regulators' views at the time as to our capital levels, quality of management, and overall condition, in addition to their assessment of a variety of other factors, including our compliance with law.
Acts of Cyber-Crime May Compromise Client and Company Information, Disrupt Access to Our Systems or Result in Loss of Client or Company Assets Our business is dependent upon the availability of technology, the Internet and telecommunication systems to enable financial transactions by clients, record and monitor transactions and transmit and receive data to and from clients and third parties.
The inability to receive dividends from FCB could have a material adverse effect on First Commonwealth’s business, financial condition and results of operations. 20 Table of Contents Acts of Cyber-Crime May Compromise Client and Company Information, Disrupt Access to Our Systems or Result in Loss of Client or Company Assets Our business is dependent upon the availability of technology, the Internet and telecommunication systems to enable financial transactions by clients, record and monitor transactions and transmit and receive data to and from clients and third parties.
We have had to recently increase wages in certain positions to attract talent, particularly in entry-level type positions and certain specialty areas. 19 Table of Contents Our Accounting Estimates and Risk Management Processes Rely On Analytical and Forecasting Models The processes we use to estimate our expected credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depends upon the use of analytical and forecasting models.
Our Accounting Estimates and Risk Management Processes Rely On Analytical and Forecasting Models The processes we use to estimate our expected credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depends upon the use of analytical and forecasting models.
Competition for the best people in many activities engaged in by us is intense and we may not be able to hire people or to retain them. We do not currently have employment agreements or non-competition agreements with any of our senior officers.
Competition for the best people in many activities engaged in by us is intense and we may not be able to hire people or to retain them.
Failure to successfully manage these risks in the development and implementation of new lines of business, new products or services and/or new technologies could have a material adverse effect on our business, financial condition and results of operations. 20 Table of Contents Our Reputation and our Business Are Subject to Negative Publicity Risk Reputation risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business.
Failure to successfully manage these risks in the development and implementation of new lines of business, new products or services and/or new technologies could have a material adverse effect on our business, financial condition and results of operations.
Unrealized losses related to available for sale securities are reflected in accumulated other comprehensive income in our consolidated balance sheets and reduce the level of our book capital and tangible common equity. However, such unrealized losses do not affect our regulatory capital ratios.
Unrealized Losses in Our Securities Portfolio Could Affect Liquidity As market interest rates have increased, we have experienced unrealized losses on our available for sale securities portfolio. Unrealized losses related to available for sale securities are reflected in accumulated other comprehensive income in our consolidated balance sheets and reduce the level of our book capital and tangible common equity.
Competition from Other Financial Institutions in Originating Loans, Attracting Deposits and Providing Various Financial Services May Adversely Affect Our Profitability We face substantial competition in originating loans and attracting deposits. This competition comes principally from other banks, savings institutions, mortgage banking companies and credit unions, as well as institutions offering uninsured investment alternatives, including money market funds.
This competition comes principally from other banks, savings institutions, mortgage banking companies and credit unions, as well as institutions offering uninsured investment alternatives, including money market funds.
In addition, financial markets and global supply chains may be adversely affected by the current or anticipated impact of military conflict, including the current Russian invasion of the Ukraine, terrorism or other geopolitical events. Current economic conditions are being heavily impacted by elevated levels of inflation and rising interest rates.
In addition, financial markets and global supply chains may be adversely affected by the current or anticipated impact of military conflicts, terrorism or other geopolitical events. Current economic conditions are being heavily impacted by recent inflationary conditions and higher interest rates, the effects of which may impact our profitability by negatively impacting our fixed costs and expenses.
This may lead to open positions remaining unfilled for longer periods of time or a need to increase wages to attract workers.
This may lead to open positions remaining unfilled for longer periods of time or a need to increase wages to attract workers. We have recently had to increase wages in certain positions to retain and attract talent, particularly in entry-level positions and certain specialty areas.
In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to us. Any such losses could have a material adverse effect on our business, financial condition and results of operations.
In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices that are insufficient to recover the full amount of the credit or derivative exposure due to us.
Negative public opinion could adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory consequences.
Our Reputation and our Business Are Subject to Negative Publicity Risk Reputation risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public opinion could adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory consequences.
In the event FCB is unable to pay dividends to First Commonwealth, First Commonwealth may not be able to service debt, pay obligations or pay dividends on its common stock. The inability to receive dividends from FCB could have a material adverse effect on First Commonwealth’s business, financial condition and results of operations.
In the event FCB is unable to pay dividends to First Commonwealth, First Commonwealth may not be able to service debt, pay obligations or pay dividends on its common stock.
We actively monitor our available for sale securities portfolio and we do not currently anticipate the need to realize material losses from the sale of securities for liquidity purposes. Furthermore, we believe it is unlikely that we would be required to sell any such securities before recovery of their amortized cost bases, which may be at maturity.
Furthermore, we believe it is unlikely that we would be required to sell any such securities before recovery of their amortized cost bases, which may be at maturity.
Risks Associated with Our Common Stock The Trading Volume in Our Common Stock Is Less Than That of Other Larger Financial Services Companies Although First Commonwealth’s common stock is listed for trading on the NYSE, the trading volume in its common stock is less than that of other, larger financial services companies.
Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations. 22 Table of Contents Risks Associated with Our Common Stock The Trading Volume in Our Common Stock Is Less Than That of Other Larger Financial Services Companies Although First Commonwealth’s common stock is listed for trading on the NYSE, the trading volume in its common stock is less than that of other, larger financial services companies.
A prolonged period of inflation may impact our profitability by negatively impacting our fixed costs and expenses. Economic and inflationary pressure on consumers and uncertainty regarding economic improvement could result in changes in consumer and business spending, borrowing and saving habits.
Economic and inflationary pressure on consumers and uncertainty regarding economic improvement could result in changes in consumer and business spending, borrowing and saving habits.
In some cases, we could be required to apply a new or revised standard retroactively, resulting in changes to previously reported financial results or a cumulative charge to retained earnings. See New Accounting Pronouncements at the end of Item 7.
These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in changes to previously reported financial results or a cumulative charge to retained earnings.
In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various remote work options which could impact the long-term performance of some types of office properties, such as those within our commercial real estate portfolio.
The COVID-19 pandemic was a catalyst for the evolution of various remote work options which could impact the long-term performance of some types of office properties, including those within our commercial real estate portfolio. Accordingly, the federal banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market.
As of December 31, 2023, approximately 27% of our deposits were either uninsured or otherwise unsecured and we rely on these deposits for liquidity.We may not be able to replace maturing deposits and advances as necessary in the future, especially if a large number of our depositors sought to withdraw their accounts, regardless of the reason.
We may not be able to replace maturing deposits and advances as necessary in the future, especially if a large number of our depositors sought to withdraw 18 Table of Contents their accounts, regardless of the reason. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations.
Our Allowance for Credit Losses may be Insufficient All borrowers carry the potential to default and our remedies to recover may not fully satisfy money previously loaned. We maintain an allowance for credit losses, which represents management’s best estimate of credit losses within the existing portfolio of loans.
Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans. Our Allowance for Credit Losses may be Insufficient All borrowers carry the potential to default and our remedies to recover may not fully satisfy money previously loaned.
Such conditions could have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations.
Any such losses could have a material adverse effect on our business, financial condition and results of operations. 21 Table of Contents Competition from Other Financial Institutions in Originating Loans, Attracting Deposits and Providing Various Financial Services May Adversely Affect Our Profitability We face substantial competition in originating loans and attracting deposits.
Removed
Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans. We Are Subject to Risk Arising from Conditions in the Commercial Real Estate Market As of December 31, 2023, commercial real estate mortgage loans comprised approximately 34% of our loan portfolio.
Added
We maintain an allowance for credit losses, which represents management’s best estimate of credit losses within the existing portfolio of loans. The allowance, in the judgment of management, is appropriate to reserve for estimated loan losses and risks inherent in the loan portfolio.
Removed
In recent years, commercial real estate markets have been experiencing substantial growth, and increased competitive pressures have contributed significantly to historically low capitalization rates and rising property values.
Added
As of December 31, 2024, approximately 27% of our deposits were either uninsured or otherwise unsecured and we rely on these deposits for liquidity.
Removed
Commercial real estate mortgage loans generally involve a greater degree of credit risk than residential real estate mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy.
Added
However, such unrealized losses do not affect our regulatory capital ratios. We actively monitor our available for sale securities portfolio and we do not currently anticipate the need to realize material losses from the sale of securities for liquidity purposes.
Removed
Because 18 Table of Contents payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulations.
Added
Such conditions could have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations. 23 Table of Contents Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government's debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States.
Removed
Accordingly, the federal banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market.
Added
Many of our investment securities are issued by the U.S. government and government agencies and sponsored entities.
Removed
Failures in our risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which, accordingly, could have a material adverse effect on our business, financial condition and results of operations.
Added
As a result of uncertain domestic political conditions, including potential future federal government shutdowns, the possibility of the federal government defaulting on its obligations for a period of time due to debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks.
Removed
A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations. Unrealized Losses in Our Securities Portfolio Could Affect Liquidity As market interest rates have increased, we have experienced unrealized losses on our available for sale securities portfolio.
Added
In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2023, Fitch lowered its long-term sovereign credit rating on the U.S. from AAA to AA+.
Removed
Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations.
Added
A further downgrade, or downgrades by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide.
Removed
Changes in Accounting Standards Could Materially Impact Our Financial Statements From time to time accounting standards setters change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

4 edited+1 added−0 removed8 unchanged
Biggest changeWe engage with a range of external experts, including cybersecurity assessors, consultants, auditors, and legal counsel in evaluating and testing our risk management systems. This enables us to leverage specialized knowledge and insights, ensuring our cybersecurity strategies and processes remain current.
Biggest changeWe also engage third party security experts to support our cybersecurity threat and incident response management and maintain information security risk insurance coverage. 25 Table of Contents We engage with a range of external experts, including cybersecurity assessors, consultants, auditors, and legal counsel in evaluating and testing our risk management systems.
In the past three years, we have not experienced any material computer data security breaches as a result of a compromise of our information systems and we are not aware and have not had a significant cybersecurity breach or attack that had a material impact on our business or operating results to date.
In the past three years, we have not experienced any material computer data security breaches as a result of a compromise of our information systems and we are not aware of any significant cybersecurity breach or attack that had a material impact on our business or operating results to date.
We employ a variety of preventative and detective 25 Table of Contents tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. We have established processes and systems to mitigate cyber risk, including regular education and training, preparedness simulations and tabletop exercises, and recovery and resilience tests.
We employ a variety of preventative and detective tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. We have established processes and systems to mitigate cyber risk, including regular education and training, preparedness simulations and tabletop exercises, and recovery and resilience tests.
We use the findings of these exercises to improve our practices, procedures, and technologies. We also engage third party security experts to support our cybersecurity threat and incident response management and maintain information security risk insurance coverage.
We use the findings of these exercises to improve our practices, procedures, and technologies.
Added
This enables us to leverage specialized knowledge and insights, ensuring our cybersecurity strategies and processes remain current.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changeFirst Commonwealth Bank has 126 community banking offices, of which 48 are leased and 78 are owned. We also lease two mortgage loan production offices, four corporate loan production offices and an office for our equipment finance business.
Biggest changeFirst Commonwealth Bank has 124 community banking offices, of which 45 are leased and 79 are owned. We also lease two mortgage loan production offices, three corporate loan production offices and an office for our equipment finance business.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

9 edited+2 added−2 removed5 unchanged
Biggest changeHe oversees First Commonwealth’s product development and assumed oversight of First Commonwealth’s technology and operations functions in July 2012. He served as Senior Vice President/Business Integration of First Commonwealth Bank from September 2007 until May 2011 and previously held positions in the technology, operations, audit and marketing areas. T.
Biggest changeMontgomery, age 57, has served as the Executive Vice President of Business Integration of First Commonwealth Bank since May 2011. He oversees First Commonwealth’s product development and assumed oversight of First Commonwealth’s technology and operations functions in July 2012.
Reske worked at the Board of Governors of the Federal Reserve System in Washington, DC and at the Federal Reserve Bank of Boston. Carrie L. Riggle, age 54, has served as Executive Vice President / Human Resources since March 1, 2013. Ms. Riggle has been with First Commonwealth since 1991. Over the course of her tenure, Ms.
Reske worked at the Board of Governors of the Federal Reserve System in Washington, DC and at the Federal Reserve Bank of Boston. Carrie L. Riggle, age 55, has served as Executive Vice President / Human Resources since March 1, 2013. Ms. Riggle has been with First Commonwealth since 1991. Over the course of her tenure, Ms.
Reske, age 60, joined First Commonwealth Financial Corporation as Executive Vice President, Chief Financial Officer and Treasurer on April 28, 2014. Prior to joining First Commonwealth, Mr. Reske served as Executive Vice President, Chief Financial Officer, and Treasurer at United Community Financial Corporation in Youngstown, Ohio from 2008 until April 2014. Mr.
Reske, age 61, joined First Commonwealth Financial Corporation as Executive Vice President, Chief Financial Officer and Treasurer on April 28, 2014. Prior to joining First Commonwealth, Mr. Reske served as Executive Vice President, Chief Financial Officer, and Treasurer at United Community Financial Corporation in Youngstown, Ohio from 2008 until April 2014. Mr.
Mine Safety Disclosures Not applicable. 26 Table of Contents Executive Officers of First Commonwealth Financial Corporation The name, age and principal occupation for each of the executive officers of First Commonwealth Financial Corporation as of December 31, 2023 is set forth below: Jane Grebenc, age 65, has served as Executive Vice President and Chief Revenue Officer of First Commonwealth Financial Corporation and President of First Commonwealth Bank since May 31, 2013.
Mine Safety Disclosures Not applicable. 26 Table of Contents Executive Officers of First Commonwealth Financial Corporation The name, age and principal occupation for each of the executive officers of First Commonwealth Financial Corporation as of December 31, 2024 is set forth below: Jane Grebenc, age 66, has served as Executive Vice President and Chief Revenue Officer of First Commonwealth Financial Corporation and President of First Commonwealth Bank since May 31, 2013.
From January 1, 2012 to March 7, 2012, he served as Interim President and Chief Executive Officer of First Commonwealth Financial Corporation.
Price served as President of First Commonwealth Bank from November 2007 to May 2013. From January 1, 2012 to March 7, 2012, he served as Interim President and Chief Executive Officer of First Commonwealth Financial Corporation.
He previously served as Senior Vice President / Legal and Compliance since September 2007. Before joining First Commonwealth, Mr. Tomb practiced law with Sherman & Howard L.L.C. in Denver, Colorado. 27 Table of Contents PART II
He previously served as Chief Risk Officer and General Counsel from November 2010 to December 31, 2024, and as Senior Vice President / Legal and Compliance since September 2007. Before joining First Commonwealth, Mr. Tomb practiced law with Sherman & Howard L.L.C. in Denver, Colorado. 27 Table of Contents PART II
Riggle has been responsible for the daily operations of the Human Resources function and was actively involved in the establishment and development of a centralized corporate human resources function within the Company. Matthew C. Tomb, age 47, has served as Executive Vice President, Chief Risk Officer and General Counsel of First Commonwealth Financial Corporation since November 2010.
Riggle has been responsible for the daily operations of the Human Resources function and was actively involved in the establishment and development of a centralized corporate human resources function within the Company. Brian J. Sohocki, age 45, has served as Executive Vice President / Chief Credit Officer since August 2024. Mr. Sohocki has been with First Commonwealth since 2010.
Lombardi, age 64, has served as Executive Vice President and Chief Audit Executive of First Commonwealth Financial Corporation since January 1, 2009. He was formerly Senior Vice President / Loan Review and Audit Manager. Norman J. Montgomery, age 56, has served as the Executive Vice President of Business Integration of First Commonwealth Bank since May 2011.
Leonard V. Lombardi, age 65, has served as Executive Vice President and Chief Audit Executive of First Commonwealth Financial Corporation since January 1, 2009. He was formerly Senior Vice President / Loan Review and Audit Manager. Michael P. McCuen, age 62, has served as Executive Vice President and Chief Lending Officer since July 2024.
Michael Price, age 61, has served as President and Chief Executive Officer of First Commonwealth Financial Corporation and Chief Executive Officer of First Commonwealth Bank since March 2012. Mr. Price served as President of First Commonwealth Bank from November 2007 to May 2013.
He served as Senior Vice President/Business Integration of First Commonwealth Bank from September 2007 until May 2011 and previously held positions in the technology, operations, audit and marketing areas. T. Michael Price, age 62, has served as President and Chief Executive Officer of First Commonwealth Financial Corporation and Chief Executive Officer of First Commonwealth Bank since March 2012. Mr.
Removed
Brian Karrip, age 63, has served as Executive Vice President and Chief Credit Officer of First Commonwealth Bank since September 2016. Prior to joining First Commonwealth, Mr. Karrip served as Executive Vice President, Specialized Lending for FirstMerit Bank. Prior to joining FirstMerit Bank, Mr.
Added
He formerly served as Corporate Banking Executive. Mr. McCuen has been with First Commonwealth since 2023. Before joining First Commonwealth, Mr. McCuen was Market President and Commercial Sales Leader for Key Bank's Southwest Ohio area since 2017. Mr. McCuen's past experience includes co-leading the middle market segment at PNC, leading Bank integrations, and various Corporate Banking leadership roles. Norman J.
Removed
Karrip served as Managing Director and Group Head of Loan Syndications and Sales at KeyBanc Capital Markets. Mr. Karrip’s financial services career also includes 16 years with National City Bank where he held a variety of roles in the commercial lending division and served as Regional President of Michigan and Illinois. Leonard V.
Added
He formerly served in roles including Deputy Chief Credit Officer and C&I Group Manager. During that time, Sohocki was instrumental in the development of First Commonwealth's Sponsor Finance Group and Commercial and Industrial loan growth initiative. Matthew C. Tomb, age 48, serves as Executive Vice President and General Counsel of First Commonwealth Financial Corporation since November 2010.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−0 removed4 unchanged
Biggest changePeriod High Sale Low Sale Cash Dividends Per Share 2023 First Quarter $ 16.43 $ 12.36 $ 0.120 Second Quarter 14.48 11.46 0.125 Third Quarter 14.54 11.94 0.125 Fourth Quarter 15.81 11.55 0.125 Period High Sale Low Sale Cash Dividends Per Share 2022 First Quarter $ 17.55 $ 15.12 $ 0.115 Second Quarter 15.23 13.01 0.120 Third Quarter 15.39 12.84 0.120 Fourth Quarter 14.92 12.99 0.120 Federal and state regulations contain restrictions on the ability of First Commonwealth to pay dividends.
Biggest changePeriod High Sale Low Sale Cash Dividends Per Share 2024 First Quarter $ 15.56 $ 12.84 $ 0.125 Second Quarter 14.24 12.53 0.130 Third Quarter 18.60 13.71 0.130 Fourth Quarter 19.41 16.24 0.130 Period High Sale Low Sale Cash Dividends Per Share 2023 First Quarter $ 16.43 $ 12.36 $ 0.120 Second Quarter 14.48 11.46 0.125 Third Quarter 14.54 11.94 0.125 Fourth Quarter 15.81 11.55 0.125 Federal and state regulations contain restrictions on the ability of First Commonwealth to pay dividends.
For information regarding restrictions on dividends, see Part I, Item 1 “Business—Supervision and Regulation—Dividends” and Part II, Item 8, “Financial Statements and Supplementary Data—Note 24, Regulatory Restrictions and Capital Adequacy.” In addition, under the terms of the capital securities issued by First Commonwealth Capital Trust II and III, First Commonwealth could not pay dividends on its common stock if First Commonwealth deferred payments on the junior subordinated debt securities that provide the cash flow for the payments on the capital securities. 28 Table of Contents The following five-year performance graph compares the cumulative total shareholder return (assuming reinvestment of dividends) on First Commonwealth’s common stock to the S&P U.S.
For information regarding restrictions on dividends, see Part I, Item 1 “Business—Supervision and Regulation—Dividends” and Part II, Item 8, “Financial Statements and Supplementary Data—Note 25, Regulatory Restrictions and Capital Adequacy.” In addition, under the terms of the capital securities issued by First Commonwealth Capital Trust II and III, First Commonwealth could not pay dividends on its common stock if First Commonwealth deferred payments on the junior subordinated debt securities that provide the cash flow for the payments on the capital securities. 28 Table of Contents The following five-year performance graph compares the cumulative total shareholder return (assuming reinvestment of dividends) on First Commonwealth’s common stock to the S&P U.S.
BMI Banks Index and the Russell 2000 Index. The stock performance graph assumes $100 was invested on December 31, 2018, and the cumulative return is measured as of each subsequent fiscal year end.
BMI Banks Index and the Russell 2000 Index. The stock performance graph assumes $100 was invested on December 31, 2019, and the cumulative return is measured as of each subsequent fiscal year end.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities First Commonwealth is listed on the NYSE under the symbol “FCF.” As of December 31, 2023, there were approximately 5,255 holders of record of First Commonwealth’s common stock.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities First Commonwealth is listed on the NYSE under the symbol “FCF.” As of December 31, 2024, there were approximately 4,975 holders of record of First Commonwealth’s common stock.
Month Ending: Total Number of Shares Purchased Average Price Paid per Share (or Unit) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 31, 2023 73,184 $ 11.75 73,184 1,427,837 November 30, 2023 — — — 1,300,752 December 31, 2023 — — — 1,126,364 Total 73,184 $ 11.75 73,184 (1) Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $12.18 as of October 31, 2023, $13.37 as of November 30, 2023 and $15.44 as of December 31, 2023.
Month Ending: Total Number of Shares Purchased Average Price Paid per Share (or Unit) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 31, 2024 455,236 $ 16.56 455,236 431,411 November 30, 2024 — — — 376,654 December 31, 2024 21,743 17.34 21,743 396,895 Total 476,979 $ 16.60 476,979 (1) Remaining number of shares approved under the Plan is based on the market value of the Company's common stock of $16.44 as of October 31, 2024, $18.83 as of November 30, 2024 and $16.92 as of December 31, 2024.
BMI Banks Index 100.00 137.36 119.83 162.92 135.13 147.41 Unregistered Sales of Equity Securities and Use of Proceeds The following table details the amount of shares repurchased during the fourth quarter of 2023.
BMI Banks Index 100.00 87.24 118.61 98.38 107.32 143.68 Unregistered Sales of Equity Securities and Use of Proceeds The following table details the amount of shares repurchased during the fourth quarter of 2024.
Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 First Commonwealth Financial Corporation 100.00 123.66 97.83 148.63 133.31 152.91 Russell 2000 Index 100.00 125.52 150.58 172.90 137.56 160.85 S&P U.S.
Period Ending Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 First Commonwealth Financial Corporation 100.00 79.11 120.20 107.81 123.66 140.16 Russell 2000 Index 100.00 119.96 137.74 109.59 128.14 142.93 S&P U.S.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

125 edited+41 added−46 removed52 unchanged
Biggest changeThe level of First Commonwealth's ratio is largely driven by the modeling of interest-bearing non-maturity deposits, which are included in the analysis as repricing within one year. 50 Table of Contents Following is the gap analysis as of December 31: 2023 0-90 Days 91-180 Days 181-365 Days Cumulative 0-365 Days Over 1 Year Through 5 Years Over 5 Years (dollars in thousands) Loans and leases $ 3,619,166 $ 446,373 $ 756,190 $ 4,821,729 $ 3,137,007 $ 945,896 Investments 72,358 44,567 97,544 214,469 606,670 733,418 Other interest-earning assets 20,440 — — 20,440 1,117 — Total interest-sensitive assets (ISA) 3,711,964 490,940 853,734 5,056,638 3,744,794 1,679,314 Certificates of deposit 271,662 210,793 569,507 1,051,962 235,562 974 Other deposits 5,515,919 — — 5,515,919 — — Borrowings 726,850 207 415 727,472 53,069 224 Total interest-sensitive liabilities (ISL) 6,514,431 211,000 569,922 7,295,353 288,631 1,198 Gap $ (2,802,467) $ 279,940 $ 283,812 $ (2,238,715) $ 3,456,163 $ 1,678,116 ISA/ISL 0.57 2.33 1.50 0.69 12.97 1,401.76 Gap/Total assets 24.46 % 2.44 % 2.48 % 19.54 % 30.16 % 14.64 % 2022 0-90 Days 91-180 Days 181-365 Days Cumulative 0-365 Days Over 1 Year Through 5 Years Over 5 Years (dollars in thousands) Loans and leases $ 3,164,495 $ 354,556 $ 575,640 $ 4,094,691 $ 2,498,042 $ 978,319 Investments 46,426 35,579 74,962 156,967 461,699 734,221 Other interest-earning assets 29,919 — — 29,919 71 — Total interest-sensitive assets (ISA) 3,240,840 390,135 650,602 4,281,577 2,959,812 1,712,540 Certificates of deposit 71,976 56,539 102,037 230,552 173,810 955 Other deposits 4,929,952 — — 4,929,952 — — Borrowings 445,065 50,204 407 495,676 3,256 50,791 Total interest-sensitive liabilities (ISL) 5,446,993 106,743 102,444 5,656,180 177,066 51,746 Gap $ (2,206,153) $ 283,392 $ 548,158 $ (1,374,603) $ 2,782,746 $ 1,660,794 ISA/ISL 0.59 3.65 6.35 0.76 16.72 33.10 Gap/Total assets 22.50 % 2.89 % 5.59 % 14.02 % 28.38 % 16.94 % Gap analysis has limitations due to the static nature of the model, which holds volumes and consumer behaviors constant in all economic and interest rate scenarios.
Biggest changeFollowing is the gap analysis as of December 31: 2024 0-90 Days 91-180 Days 181-365 Days Cumulative 0-365 Days Over 1 Year Through 5 Years Over 5 Years (dollars in thousands) Loans and leases $ 3,668,849 $ 423,523 $ 738,672 $ 4,831,044 $ 3,212,002 $ 851,465 Investments 57,039 50,445 119,475 226,959 675,061 771,365 Other interest-earning assets 27,160 — — 27,160 — 1,198 Total interest-sensitive assets (ISA) 3,753,048 473,968 858,147 5,085,163 3,887,063 1,624,028 Certificates of deposit 681,794 410,573 552,392 1,644,759 104,383 1,218 Other deposits 5,677,938 — — 5,677,938 — — Borrowings 159,245 211 423 159,879 179,508 — Total interest-sensitive liabilities (ISL) 6,518,977 410,784 552,815 7,482,576 283,891 1,218 Gap $ (2,765,929) $ 63,184 $ 305,332 $ (2,397,413) $ 3,603,172 $ 1,622,810 ISA/ISL 0.58 1.15 1.55 0.68 13.69 1,333.36 Gap/Total assets 23.88 % 0.55 % 2.64 % 20.69 % 31.10 % 14.01 % 51 Table of Contents 2023 0-90 Days 91-180 Days 181-365 Days Cumulative 0-365 Days Over 1 Year Through 5 Years Over 5 Years (dollars in thousands) Loans and leases $ 3,619,166 $ 446,373 $ 756,190 $ 4,821,729 $ 3,137,007 $ 945,896 Investments 72,358 44,567 97,544 214,469 606,670 733,418 Other interest-earning assets 20,440 — — 20,440 1,117 — Total interest-sensitive assets (ISA) 3,711,964 490,940 853,734 5,056,638 3,744,794 1,679,314 Certificates of deposit 271,662 210,793 569,507 1,051,962 235,562 974 Other deposits 5,515,919 — — 5,515,919 — — Borrowings 726,850 207 415 727,472 53,069 224 Total interest-sensitive liabilities (ISL) 6,514,431 211,000 569,922 7,295,353 288,631 1,198 Gap $ (2,802,467) $ 279,940 $ 283,812 $ (2,238,715) $ 3,456,163 $ 1,678,116 ISA/ISL 0.57 2.33 1.50 0.69 12.97 1,401.76 Gap/Total assets 24.46 % 2.44 % 2.48 % 19.54 % 30.16 % 14.64 % Gap analysis has limitations due to the static nature of the model, which holds volumes and consumer behaviors constant in all economic and interest rate scenarios.
Most of the growth in this portfolio was in the Mortgage-Backed Securities - Commercial category as these securities provide ongoing liquidity through regular principal paydowns and additionally can be pledged for borrowings or to secure public deposits. The following is a schedule of the contractual maturity distribution of securities available for sale at December 31, 2023. U.S.
Most of the growth in this portfolio was in the Mortgage-Backed Securities - Commercial category as these securities provide ongoing liquidity through regular principal paydowns and additionally can be pledged for borrowings or to secure public deposits. The following is a schedule of the contractual maturity distribution of securities available for sale at December 31, 2024. U.S.
Loans with these term commitments will be moved to the commercial real estate category when the construction phase of the project is completed. First Commonwealth has a legal lending limit of $183.3 million to any one borrower or closely related group of borrowers, but has established lower thresholds for credit risk management.
Loans with these term commitments will be moved to the commercial real estate category when the construction phase of the project is completed. First Commonwealth has a legal lending limit of $190.3 million to any one borrower or closely related group of borrowers, but has established lower thresholds for credit risk management.
For a description of the methodology used to calculate the allowance for credit losses, please refer to “Critical Accounting Policies and Significant Accounting Estimates—Allowance for Credit Losses.” 45 Table of Contents Investment Portfolio Marketable securities that we hold in our investment portfolio, which are classified as “securities available for sale,” act as a source of liquidity.
For a description of the methodology used to calculate the allowance for credit losses, please refer to “Critical Accounting Policies and Significant Accounting Estimates—Allowance for Credit Losses.” 46 Table of Contents Investment Portfolio Marketable securities that we hold in our investment portfolio, which are classified as “securities available for sale,” act as a source of liquidity.
After incorporating the impact of our cash flow hedges that convert the interest rate on $500.0 million of our 1-month Secured Overnight Financing Rate ("SOFR") based loans to fixed rates, the variable and adjustable interest rates would account for 46% of our loan portfolio.
After incorporating the impact of our cash flow hedges that convert the interest rate on $425.0 million of our 1-month Secured Overnight Financing Rate ("SOFR") based loans to fixed rates, the variable and adjustable interest rates would account for 46% of our loan portfolio.
Contractual Obligations and Off-Balance Sheet Arrangements The table below sets forth our contractual obligations to make future payments as of December 31, 2023. For a more detailed description of each category of obligation, refer to the note in our Consolidated Financial Statements indicated in the table below.
Contractual Obligations and Off-Balance Sheet Arrangements The table below sets forth our contractual obligations to make future payments as of December 31, 2024. For a more detailed description of each category of obligation, refer to the note in our Consolidated Financial Statements indicated in the table below.
We generate funds to meet our cash flow needs primarily through the core deposit base of FCB and the maturity or repayment of loans and other interest-earning assets, including investments. Core deposits are the most stable source of liquidity a bank can have due to the long-term relationship with a deposit customer.
We generate funds to meet our cash flow needs primarily through the core deposit base of First Commonwealth Bank and the maturity or repayment of loans and other interest-earning assets, including investments. Core deposits are the most stable source of liquidity a bank can have due to the long-term relationship with a deposit customer.
In addition, see Note 10 “Commitments and Letters of Credit” for detail related to our off-balance sheet commitments to extend credit, financial standby letters of credit, performance standby letters of credit and commercial letters of credit as of December 31, 2023.
In addition, see Note 10 “Commitments and Letters of Credit” for detail related to our off-balance sheet commitments to extend credit, financial standby letters of credit, performance standby letters of credit and commercial letters of credit as of December 31, 2024.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis represents an overview of the financial condition and the results of operations of First Commonwealth, and its subsidiaries, as of and for the years ended December 31, 2023, and 2022.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis represents an overview of the financial condition and the results of operations of First Commonwealth and its subsidiaries, as of and for the years ended December 31, 2024, and 2023.
Liquidity provided from sales, calls and maturities was utilized to fund growth in the loan portfolio or reinvested into investment securities and interest-bearing deposits with banks. 46 Table of Contents Following is a detailed schedule of the amortized cost of securities held to maturity as of December 31: 2023 2022 2021 (dollars in thousands) Obligations of U.S.
Liquidity provided from sales, calls and maturities was utilized to fund growth in the loan portfolio or reinvested into investment securities and interest-bearing deposits with banks. 47 Table of Contents Following is a detailed schedule of the amortized cost of securities held to maturity as of December 31: 2024 2023 2022 (dollars in thousands) Obligations of U.S.
For additional information, including credit quality, related to these segments, see Note 9 "Loans and Leases and Allowance for Credit Losses" of the Consolidated Financial Statements. Nonperforming Loans Nonperforming loans include nonaccrual loans and restructured loans. Nonaccrual loans represent loans on which interest accruals have been discontinued.
For additional information related to these segments, including credit quality, see Note 9 "Loans and Leases and Allowance for Credit Losses" of the Consolidated Financial Statements. 44 Table of Contents Nonperforming Loans Nonperforming loans include nonaccrual loans and restructured loans. Nonaccrual loans represent loans on which interest accruals have been discontinued.
Management believes that the allowance for credit losses is at a level that is sufficient to absorb expected losses in the loan and lease portfolio at December 31, 2023.
Management believes that the allowance for credit losses is at a level that is sufficient to absorb expected losses in the loan and lease portfolio at December 31, 2024.
Net interest income was negatively impacted by a decrease of $45.3 million in average net free funds at December 31, 2023 as compared to December 31, 2022. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets.
Net interest income was negatively impacted by a decrease of $147.3 million in average net free funds at December 31, 2024 as compared to December 31, 2023. Average net free funds are the excess of noninterest-bearing demand deposits, other noninterest-bearing liabilities and shareholders’ equity over noninterest-earning assets.
The risk of loss on these loans is evaluated by comparing the loan balance to the estimated fair value of any underlying collateral or the present value of projected future cash flows. Losses or specifically assigned allowance for credit losses are recognized where appropriate. Nonperforming loans increased $4.0 million at December 31, 2023 compared to the prior year.
The probable risk of loss on these loans is evaluated by comparing the loan balance to the estimated fair value of any underlying collateral or the present value of projected future cash flows. Losses or specifically assigned allowance for credit losses are recognized where appropriate. Nonperforming loans increased $22.0 million at December 31, 2024 compared to the prior year.
The following gap analysis compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time. The ratio of rate sensitive assets to rate sensitive liabilities repricing within a one-year period was 0.69 and 0.76 at December 31, 2023 and 2022, respectively.
The following gap analysis compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time. The ratio of rate sensitive assets to rate sensitive liabilities repricing within a one-year period was 0.68 and 0.69 at December 31, 2024 and 2023, respectively.
The amount of allowance related to nonperforming loans was determined by using estimated fair values obtained from current appraisals and updated discounted cash flow analyses. The increase in specific reserves is primarily the result of individually analyzed PCD loans acquired from Centric.
The amount of allowance related to individually analyzed nonperforming loans was determined by using estimated fair values obtained from current appraisals and updated discounted cash flow analyses. The increase in specific reserves is primarily the result of new nonperforming loans.
To compare the tax exempt asset yields to taxable yields, amounts are adjusted to the pretax equivalent amounts based on the marginal corporate federal income tax rate of 21%. The taxable equivalent adjustment to net interest income for 2023 was $1.2 million compared to $1.0 million in 2022.
To compare the tax exempt asset yields to taxable yields, amounts are adjusted to the pretax equivalent amounts based on the marginal corporate federal income tax rate of 21%. The taxable equivalent adjustment to net interest income for 2024 was $1.3 million compared to $1.2 million in 2023.
Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on February 28, 2023 for a discussion and analysis of the factors that affected periods prior to 2023.
Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on February 29, 2024 for a discussion and analysis of the factors that affected periods prior to 2024.
Repricing risk arises from differences in the cash flow or repricing between asset and liability portfolios. Basis risk arises when asset and liability portfolios are related to different market rate indices, which do not always change by the same amount.
Repricing risk arises from differences in the cash flow or repricing between 50 Table of Contents asset and liability portfolios. Basis risk arises when asset and liability portfolios are related to different market rate indices, which do not always change by the same amount.
The impact of the sensitivity to changes in interest rates is provided in the table below. 51 Table of Contents The following table presents an analysis of the potential sensitivity of our annual net interest income to gradual changes in interest rates over a 12-month time frame as compared with net interest income if rates remained unchanged and there are no changes in balance sheet categories.
The following table presents an analysis of the potential sensitivity of our annual net interest income to gradual changes in interest rates over a 12-month time frame as compared with net interest income if rates remained unchanged and there are no changes in balance sheet categories.
Net interest income comprises a majority of our revenue (net interest income before provision expense plus noninterest income) at 80% and 76% for the years ended December 31, 2023 and 2022, respectively.
Net interest income comprises a majority of our revenue (net interest income before provision expense plus noninterest income) at 79% and 80% for the years ended December 31, 2024 and 2023, respectively.
First Commonwealth also maintains a reserve for unfunded loan commitments and letters of credit based upon credit risk and probability of funding. The reserve totaled $7.3 million at December 31, 2023 and is classified in “Other liabilities” on the Consolidated Statements of Financial Condition.
First Commonwealth also maintains a reserve for unfunded loan commitments and letters of credit based upon credit risk and probability of funding. The reserve totaled $4.1 million at December 31, 2024 and is classified in “Other liabilities” on the Consolidated Statements of Financial Condition.
At December 31, 2023, FCB operated 126 community banking offices throughout Pennsylvania and Ohio, as well as loan production offices in Harrisburg, Pennsylvania, and Cleveland, Columbus, Canton, Canfield and Hudson, Ohio.
At December 31, 2024, FCB operated 124 community banking offices throughout Pennsylvania and Ohio, as well as loan production offices in Harrisburg, Pennsylvania, and Cleveland, Columbus, Canton, Canfield and Hudson, Ohio.
However, we do not anticipate liquidating the investments prior to maturity. Following is a detailed schedule of the amortized cost of securities available for sale as of December 31: 2023 2022 2021 (dollars in thousands) Obligations of U.S. Government Agencies: Mortgage-Backed Securities—Residential $ 3,565 $ 4,127 $ 5,242 Mortgage-Backed Securities—Commercial 512,979 324,306 365,024 Obligations of U.S.
However, we do not anticipate liquidating the investments prior to maturity. Following is a detailed schedule of the amortized cost of securities available for sale as of December 31: 2024 2023 2022 (dollars in thousands) Obligations of U.S. Government Agencies: Mortgage-Backed Securities—Residential $ 3,096 $ 3,565 $ 4,127 Mortgage-Backed Securities—Commercial 779,232 512,979 324,306 Obligations of U.S.
Additional detail on credit risk is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Provision for Credit Losses,” “Allowance for Credit Losses" and "Credit Risk.” Provision for credit losses on loans and leases as a percentage of net charge-offs decreased to 23.6% for the year ended December 31, 2023 from 245.5% for the year ended December 31, 2022.
Additional detail on credit risk is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Provision for Credit Losses,” “Allowance for Credit Losses" and "Credit Risk.” Provision for credit losses on loans and leases as a percentage of net charge-offs increased to 103.8% for the year ended December 31, 2024 from 23.6% for the year ended December 31, 2023.
Gross unrealized gains were $8.2 million and gross unrealized losses were $125.6 million. The level of gross unrealized losses is directly related to the increase in market interest rates.
Gross unrealized gains were $5.4 million and gross unrealized losses were $125.6 million. The level of gross unrealized losses is directly related to the increase in market interest rates.
The yield on interest-bearing deposits with banks increased 448 basis points compared to the prior year as a result of higher interest rates while the average balance decreased $12.2 million. Increases in the cost of interest-bearing liabilities partially offset the positive impact of higher yields on interest-earning assets.
The yield on interest-bearing deposits with banks increased 13 basis points compared to the prior year as a result of higher interest rates, while the average balance decreased $11.8 million. Increases in the cost of interest-bearing liabilities offset the positive impact of higher yields on interest-earning assets.
The cost of interest-bearing liabilities was 2.03% for the year ended December 31, 2023, compared to 0.31% for the same period in 2022.
The cost of interest-bearing liabilities was 2.83% for the year ended December 31, 2024, compared to 2.03% for the same period in 2023.
Comparing December 31, 2023 to December 31, 2022, the general reserve for performing loans is 1.26% and 1.34%, respectively, of total performing loans for both periods. Reserves for individually analyzed loans increased from 2.0% of nonperforming loans at December 31, 2022 to 11.5% of nonperforming loans at December 31, 2023.
Comparing December 31, 2024 to December 31, 2023, the general reserve for performing loans is 1.24% and 1.26%, respectively, of total performing loans for both periods. Reserves for individually analyzed loans increased from 11.5% of nonperforming loans at December 31, 2023 to 13.0% of nonperforming loans at December 31, 2024.
The allowance for credit losses as a percentage of nonperforming loans was 298.2% and 290.0% at December 31, 2023 and 2022, respectively. The allowance for credit losses represents management’s estimate of expected losses in the loan portfolio at a specific point in time.
The allowance for credit losses as a percentage of nonperforming loans was 193.5% and 298.2% at December 31, 2024 and 2023, respectively. The allowance for credit losses represents management’s estimate of expected losses in the loan portfolio at a specific point in time.
Allowance for Credit Losses Following is a summary of the allocation of the allowance for credit losses at December 31: 2023 2022 2021 2020 2019 Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) (dollars in thousands) Commercial, financial, agricultural and other $ 27,996 17 % $ 22,650 16 % $ 18,093 17 % $ 17,187 23 % $ 20,234 20 % Real estate construction 7,418 7 8,822 7 4,220 7 7,966 6 2,558 7 Residential real estate 23,901 27 21,412 29 12,625 28 14,358 26 4,093 27 Commercial real estate 37,071 34 28,804 31 33,376 33 41,953 33 19,768 34 Loans to individuals 21,332 15 21,218 17 24,208 15 19,845 12 4,984 12 Total $ 117,718 $ 102,906 $ 92,522 $ 101,309 $ 51,637 Allowance for credit losses as percentage of end-of-period loans and leases outstanding 1.31 % 1.35 % 1.35 % 1.50 % 0.83 % (a) Represents the ratio of loans in each category to total loans.
Allowance for Credit Losses Following is a summary of the allocation of the allowance for credit losses at December 31: 2024 2023 2022 2021 2020 Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) Allowance Amount % (a) (dollars in thousands) Commercial, financial, agricultural and other $ 29,131 19 % $ 27,996 17 % $ 22,650 16 % $ 18,093 17 % $ 17,187 23 % Real estate construction 6,030 5 7,418 7 8,822 7 4,220 7 7,966 6 Residential real estate 22,396 26 23,901 27 21,412 29 12,625 28 14,358 26 Commercial real estate 40,232 35 37,071 34 28,804 31 33,376 33 41,953 33 Loans to individuals 21,117 15 21,332 15 21,218 17 24,208 15 19,845 12 Total $ 118,906 $ 117,718 $ 102,906 $ 92,522 $ 101,309 Allowance for credit losses as percentage of end-of-period loans and leases outstanding 1.32 % 1.31 % 1.35 % 1.35 % 1.50 % (a) Represents the ratio of loans in each category to total loans.
The allowance for credit losses increased $14.8 million from December 31, 2022 to December 31, 2023. The allowance for credit losses as a percentage of end-of-period loans and leases outstanding was 1.31% and 1.35% at December 31, 2023 and 2022, respectively. The allowance for credit losses includes both a general reserve for performing loans and reserves for individually analyzed loans.
The allowance for credit losses increased $1.2 million from December 31, 2023 to December 31, 2024. The allowance for credit losses as a percentage of end-of-period loans and leases outstanding was 1.32% and 1.31% at December 31, 2024 and 2023, respectively. The allowance for credit losses includes both a general reserve for performing loans and reserves for individually analyzed loans.
Long-term debt increased $5.5 million, from $181.2 million at December 31, 2022 to $186.8 million at December 31, 2023. For additional information concerning our short-term borrowings, subordinated debentures and other long-term debt, please refer to Note 14 “Short-term Borrowings,” Note 15 “Subordinated Debentures” and Note 16 “Other Long-term Debt” of the Consolidated Financial Statements.
Long-term debt increased $76.2 million, from $186.8 million at December 31, 2023 to $263.0 million at December 31, 2024. For additional information concerning our short-term borrowings, subordinated debentures and other long-term debt, please refer to Note 15 “Short-term Borrowings,” Note 16 “Subordinated Debentures” and Note 17 “Other Long-term Debt” of the Consolidated Financial Statements.
The increase of 161 basis points in the cost of interest-bearing deposits can be attributed to higher market interest rates and changes in the mix of deposits as customers moved funds to take advantage of the increased rates offered on money market accounts and time deposits.
The increase of 92 basis points in the cost of interest-bearing deposits can be attributed to market interest rates, which influenced the mix of deposits as customers moved funds into higher costing deposits to take advantage of the increased rates offered on money market accounts and time deposits.
However, the gap analysis incorporates only the level of interest-earning assets and interest-bearing liabilities and not the sensitivity each has to changes in interest rates.
However, the gap analysis incorporates only the level of interest-earning assets and interest-bearing liabilities and not the sensitivity each has to changes in interest rates. The impact of the sensitivity to changes in interest rates is provided in the table below.
Changes in the volume of interest-earning assets and interest-bearing liabilities positively increased net interest income by $55.9 million in the year ended December 31, 2023 compared to the same period in 2022.
Changes in the volume of interest-earning assets and interest-bearing liabilities positively increased net interest income by $1.5 million in the year ended December 31, 2024 compared to the same period in 2023.
The following is a comparison of nonperforming assets and the effects on interest due to nonaccrual loans for the period ended December 31: 2023 2022 2021 2020 2019 (dollars in thousands) Nonperforming Loans: Loans on nonaccrual basis $ 39,472 $ 20,193 $ 34,926 $ 30,801 $ 18,638 Loans held for sale on nonaccrual basis — — — 13 — Troubled debt restructured loans on nonaccrual basis — 8,852 13,134 14,740 6,037 Troubled debt restructured loans on accrual basis — 6,442 7,120 8,512 7,542 Total nonperforming loans $ 39,472 $ 35,487 $ 55,180 $ 54,066 $ 32,217 Loans and leases past due in excess of 90 days and still accruing $ 9,436 $ 1,991 $ 1,606 $ 1,523 $ 2,073 Other real estate owned $ 422 $ 534 $ 642 $ 1,215 $ 2,228 Loans and leases outstanding at end of period $ 8,968,761 $ 7,642,143 $ 6,839,230 $ 6,761,183 $ 6,189,148 Average loans and leases outstanding $ 8,714,770 $ 7,172,624 $ 6,777,192 $ 6,737,339 $ 5,987,398 Nonperforming loans as a percentage of total loans and leases 0.44 % 0.46 % 0.81 % 0.80 % 0.52 % Provision for credit losses on loans and leases $ 7,106 $ 17,521 $ (377) $ 53,472 $ 14,533 Provision for credit losses - acquisition day 1 non-PCD $ 10,653 $ — $ — $ — $ — Allowance for credit losses $ 117,718 $ 102,906 $ 92,522 $ 101,309 $ 51,637 Net charge-offs $ 30,152 $ 7,137 $ 8,410 $ 17,193 $ 10,660 Net charge-offs as a percentage of average loans and leases outstanding 0.35 % 0.10 % 0.12 % 0.26 % 0.18 % Provision for credit losses on loans and leases as a percentage of net charge-offs (b) 23.57 % 245.50 % (4.48) % 311.01 % 136.33 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (a) 1.31 % 1.35 % 1.35 % 1.50 % 0.83 % Allowance for credit losses as a percentage of nonperforming loans (a) 298.23 % 289.98 % 167.67 % 187.43 % 160.28 % Gross income that would have been recorded at original rates $ 3,894 $ 1,444 $ 3,503 $ 3,733 $ 1,860 Interest that was reflected in income 530 244 569 297 262 Net reduction to interest income due to nonaccrual $ 3,364 $ 1,200 $ 2,934 $ 3,436 $ 1,598 (a) End of period loans and nonperforming loans exclude loans held for sale.
The following is a comparison of nonperforming assets and the effects on interest due to nonaccrual loans for the period ended December 31: 2024 2023 2022 2021 2020 (dollars in thousands) Nonperforming Loans: Loans on nonaccrual basis $ 61,456 $ 39,472 $ 20,193 $ 34,926 $ 30,801 Loans held for sale on nonaccrual basis — — — — 13 Troubled debt restructured loans on nonaccrual basis — — 8,852 13,134 14,740 Troubled debt restructured loans on accrual basis — — 6,442 7,120 8,512 Total nonperforming loans $ 61,456 $ 39,472 $ 35,487 $ 55,180 $ 54,066 Loans and leases past due in excess of 90 days and still accruing $ 2,064 $ 9,436 $ 1,991 $ 1,606 $ 1,523 Other real estate owned $ 895 $ 422 $ 534 $ 642 $ 1,215 Loans and leases outstanding at end of period $ 8,983,754 $ 8,968,761 $ 7,642,143 $ 6,839,230 $ 6,761,183 Average loans and leases outstanding $ 9,013,742 $ 8,714,770 $ 7,172,624 $ 6,777,192 $ 6,737,339 Nonperforming loans as a percentage of total loans and leases 0.68 % 0.44 % 0.46 % 0.81 % 0.80 % Provision for credit losses on loans and leases $ 32,368 $ 7,106 $ 17,521 (377) 53,472 Provision for credit losses - acquisition day 1 non-PCD $ — $ 10,653 $ — $ — $ — Allowance for credit losses $ 118,906 $ 117,718 $ 102,906 $ 92,522 $ 101,309 Net charge-offs $ 31,180 $ 30,152 $ 7,137 $ 8,410 $ 17,193 Net charge-offs as a percentage of average loans and leases outstanding 0.35 % 0.35 % 0.10 % 0.12 % 0.26 % Provision for credit losses on loans and leases as a percentage of net charge-offs (b) 103.81 % 23.57 % 245.50 % (4.48) % 311.01 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding (a) 1.32 % 1.31 % 1.35 % 1.35 % 1.50 % Allowance for credit losses as a percentage of nonperforming loans (a) 193.48 % 298.23 % 289.98 % 167.67 % 187.43 % Gross income that would have been recorded at original rates $ 6,717 $ 3,894 $ 1,444 $ 3,503 $ 3,733 Interest that was reflected in income 705 530 244 569 297 Net reduction to interest income due to nonaccrual $ 6,012 $ 3,364 $ 1,200 $ 2,934 $ 3,436 (a) End of period loans and nonperforming loans exclude loans held for sale.
As of December 31, 2023, a reserve for expected credit losses of $7.3 million was recorded for unused commitments and letters of credit. Liquidity Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers as well as our operating cash needs with cost-effective funding.
As of December 31, 2024, a reserve for expected credit losses of $4.1 million was recorded for unused commitments and letters of credit. 49 Table of Contents Liquidity Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, as well as our operating cash needs, with cost-effective funding.
The level of deposits during any period is sometimes influenced by factors outside of management’s control, such as the level of short-term and long-term market interest rates and yields offered on competing investments, such as money market mutual funds. Deposits increased $1.2 billion during 2023, and comprised 91% of total liabilities at both December 31, 2023 and December 31, 2022.
The level of deposits during any period is sometimes influenced by factors outside of management’s control, such as the level of short-term and long-term market interest rates and yields offered on competing investments, such as money market mutual funds. Deposits increased $485.7 million during 2024, and comprised 95% and 91% of total liabilities at December 31, 2024 and 2023, respectively.
The taxable equivalent yield on interest-earning assets was 5.23% for the year ended December 31, 2023, an increase of 144 basis points from the 3.79% yield for the same period in 2022.
The taxable equivalent yield on interest-earning assets was 5.62% for the year ended December 31, 2024, an increase of 39 basis points from the 5.23% yield for the same period in 2023.
Proceeds from the sale, maturity and redemption of investment securities totaled $173.9 million during 2023 and provided liquidity to fund loans, purchase investment securities and fund depositor withdrawals.
Proceeds from the sale, maturity and redemption of investment securities totaled $370.5 million during 2024 and provided liquidity to fund loans, purchase investment securities and fund depositor withdrawals.
ASU 2023-09 is effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 should be applied prospectively, with an option for retrospective application to each period in the financial statements. The Company is in the process of assessing the impact of adoption on its consolidated financial statements.
ASU 2023-09 is effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 should be applied prospectively, with an option for retrospective application to each period in the financial statements. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.
Government Agencies: Mortgage-Backed Securities—Residential $ 1,781 $ 2,008 $ 2,409 Mortgage-Backed Securities—Commercial 69,502 75,229 91,439 Obligations of U.S.
Government Agencies: Mortgage-Backed Securities—Residential $ 1,586 $ 1,781 $ 2,008 Mortgage-Backed Securities—Commercial 89,404 69,502 75,229 Obligations of U.S.
The allowance for credit losses includes specific allocations of $4.5 million related to nonperforming loans covering 11% of the total nonperforming balance at December 31, 2023 and specific allocations of $0.7 million covering 2% of the total nonperforming balance at December 31, 2022.
The allowance for credit losses includes specific allocations of $8.0 million related to nonperforming loans covering 13% of the total nonperforming balance at December 31, 2024 and specific allocations of $4.5 million covering 12% of the total nonperforming balance at December 31, 2023.
As such, the ALCO continuously evaluates strategies to manage our exposure to interest rate fluctuations. Asset/liability models require that certain assumptions be made, such as prepayment rates on earning assets and the impact of pricing on non-maturity deposits, which may differ from actual experience. These business assumptions are based upon our experience, business plans and published industry experience.
The ALCO is responsible for the identification and management of interest rate risk exposure. As such, the ALCO continuously evaluates strategies to manage our exposure to interest rate fluctuations. Asset/liability models require that certain assumptions be made, such as prepayment rates on earning assets and the impact of pricing on non-maturity deposits, which may differ from actual experience.
Government-Sponsored Enterprises: Mortgage-Backed Securities—Residential 296,432 329,267 387,848 Mortgage-Backed Securities—Commercial 2,190 4,794 7,309 Other Government-Sponsored Enterprises 22,543 22,221 21,904 Obligations of States and Political Subdivisions 25,561 26,643 29,402 Debt Securities Issued by Foreign Governments 1,000 1,000 1,000 Total Securities Held to Maturity $ 419,009 $ 461,162 $ 541,311 The following is a schedule of the contractual maturity distribution of securities held to maturity at December 31, 2023.
Government-Sponsored Enterprises: Mortgage-Backed Securities—Residential 266,587 296,432 329,267 Mortgage-Backed Securities—Commercial — 2,190 4,794 Other Government-Sponsored Enterprises 22,869 22,543 22,221 Obligations of States and Political Subdivisions 24,193 25,561 26,643 Debt Securities Issued by Foreign Governments 1,000 1,000 1,000 Total Securities Held to Maturity $ 405,639 $ 419,009 $ 461,162 The following is a schedule of the contractual maturity distribution of securities held to maturity at December 31, 2024.
Also contributing to the increase in yield on interest-earning assets was th e yield on the investment portfolio, which increased by 48 basis points compared to the prior year, primarily as new volume rates were higher than the portfolio yield. The average investment portfolio balance decreased $118.0 million as maturities and runoff funded loan growth.
Also contributing to the increase in yield on interest-earning assets was th e yield on the investment portfolio, which increased by 90 basis points compared to the prior year, primarily as new volume rates were higher than the portfolio yield. The average investment portfolio balance increased $276.0 million as growth in average deposits exceeded the funding needs for loan growth.
Net Interest Income Net interest income, which is our primary source of revenue, is the difference between interest income from earning assets (loans and securities) and interest expense paid on liabilities (deposits, short-term borrowings and long-term debt).
Net Interest Income Net interest income, which is our primary source of revenue, is the difference between interest income from earning assets (loans and securities) and interest expense paid on liabilities (deposits, short-term borrowings and long-term debt). The net interest margin is expressed as the percentage of net interest income, on a fully taxable equivalent basis, to average interest-earning assets.
Government-Sponsored Enterprises: Mortgage-Backed Securities—Residential 559,769 527,777 632,687 Other Government-Sponsored Enterprises 1,000 1,000 1,000 Obligations of States and Political Subdivisions 9,226 9,482 9,538 Corporate Securities 51,886 32,010 32,088 Total Securities Available for Sale $ 1,138,425 $ 898,702 $ 1,045,579 As of December 31, 2023, securities available for sale had a fair value of $1.0 billion.
Government-Sponsored Enterprises: Mortgage-Backed Securities—Residential 413,434 559,769 527,777 Other Government-Sponsored Enterprises 1,000 1,000 1,000 Obligations of States and Political Subdivisions 8,510 9,226 9,482 Corporate Securities 62,475 51,886 32,010 Total Securities Available for Sale $ 1,267,747 $ 1,138,425 $ 898,702 As of December 31, 2024, securities available for sale had a fair value of $1.1 billion.
Nonperforming loans as a percentage of total loans decreased to 0.44% at December 31, 2023 from 0.46% at December 31, 2022. The allowance to nonperforming loan ratio was 298.2% as of December 31, 2023 and 290.0% at December 31, 2022.
Nonperforming loans as a percentage of total loans increased to 0.68% at December 31, 2024 from 0.44% at December 31, 2023. The allowance to nonperforming loan ratio was 193.5% as of December 31, 2024 and 298.2% at December 31, 2023.
Management believes that the allowance for credit losses is at a level deemed appropriate to absorb expected losses inherent in the loan portfolio at December 31, 2023. 38 Table of Contents A detailed analysis of our credit loss experience for the previous five years is shown below: 2023 2022 2021 2020 2019 (dollars in thousands) Loans and leases outstanding at end of year $ 8,968,761 $ 7,642,143 $ 6,839,230 $ 6,761,183 $ 6,189,148 Average loans outstanding $ 8,714,770 $ 7,172,624 $ 6,777,192 $ 6,737,339 $ 5,987,398 Balance, beginning of year $ 102,906 $ 92,522 $ 101,309 $ 51,637 $ 47,764 Day 1 allowance for credit loss on PCD acquired loans 27,205 — — — — Provision for credit losses - acquisition day 1 non-PCD 10,653 — — — — Adoption of accounting standard - ASU 2016-13 — — — 13,393 — Loans charged off: Commercial, financial, agricultural and other 19,199 2,361 7,020 6,318 3,393 Real estate construction — — 9 — — Residential real estate 561 339 309 1,040 1,042 Commercial real estate 6,277 2,487 1,659 4,939 2,008 Loans to individuals 7,230 4,658 4,061 6,953 5,831 Total loans charged off 33,267 9,845 13,058 19,250 12,274 Recoveries of loans previously charged off: Commercial, financial, agricultural and other 498 394 2,430 314 326 Real estate construction — 9 155 26 158 Residential real estate 247 187 468 414 315 Commercial real estate 151 769 135 312 189 Loans to individuals 2,219 1,349 1,460 991 626 Total recoveries 3,115 2,708 4,648 2,057 1,614 Net charge-offs 30,152 7,137 8,410 17,193 10,660 Provision charged to expense 7,106 17,521 (377) 53,472 14,533 Balance, end of year $ 117,718 $ 102,906 $ 92,522 $ 101,309 $ 51,637 Ratios: Net charge-offs as a percentage of average loans and leases outstanding 0.35 % 0.10 % 0.12 % 0.26 % 0.18 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding 1.31 % 1.35 % 1.35 % 1.50 % 0.83 % 39 Table of Contents Noninterest Income The components of noninterest income for each year in the three-year period ended December 31 are as follows: 2023 compared to 2022 2023 2022 2021 $ Change % Change (dollars in thousands) Noninterest Income: Trust income $ 10,516 $ 10,518 $ 11,111 $ (2) — % Service charges on deposit accounts 21,437 19,641 17,984 1,796 9 Insurance and retail brokerage commissions 9,628 8,857 8,502 771 9 Income from bank owned life insurance 4,875 5,459 6,433 (584) (11) Card-related interchange income 28,640 27,603 27,954 1,037 4 Swap fee income 1,519 4,685 2,543 (3,166) (68) Other income 9,388 10,263 8,185 (875) (9) Subtotal 86,003 87,026 82,712 (1,023) (1) Net securities (losses) gains (103) 2 16 (105) (5,250) Gain on sale of mortgage loans 3,951 5,276 13,555 (1,325) (25) Gain on sale of other loans and assets 6,744 6,036 8,130 708 12 Derivative mark to market 14 368 2,344 (354) (96) Total noninterest income $ 96,609 $ 98,708 $ 106,757 $ (2,099) (2) % Noninterest income, excluding net securities (losses) gains, gain on sale of mortgage loans, gain on sale of other loans and assets and the derivatives mark to market, decreased $1.0 million, or 1%, in 2023.
Management believes that the allowance for credit losses is at a level deemed appropriate to absorb expected losses inherent in the loan portfolio at December 31, 2024. 38 Table of Contents A detailed analysis of our credit loss experience for the previous five years is shown below: 2024 2023 2022 2021 2020 (dollars in thousands) Loans and leases outstanding at end of year $ 8,983,754 $ 8,968,761 $ 7,642,143 $ 6,839,230 $ 6,761,183 Average loans outstanding $ 9,013,742 $ 8,714,770 $ 7,172,624 $ 6,777,192 $ 6,737,339 Balance, beginning of year $ 117,718 $ 102,906 $ 92,522 $ 101,309 $ 51,637 Day 1 allowance for credit loss on PCD acquired loans — 27,205 — — — Provision for credit losses - acquisition day 1 non-PCD — 10,653 — — — Adoption of accounting standard - ASU 2016-13 — — — — 13,393 Loans charged off: Commercial, financial, agricultural and other 15,512 19,199 2,361 7,020 6,318 Real estate construction 1,092 — — 9 — Residential real estate 483 561 339 309 1,040 Commercial real estate 8,678 6,277 2,487 1,659 4,939 Loans to individuals 9,663 7,230 4,658 4,061 6,953 Total loans charged off 35,428 33,267 9,845 13,058 19,250 Recoveries of loans previously charged off: Commercial, financial, agricultural and other 813 498 394 2,430 314 Real estate construction 6 — 9 155 26 Residential real estate 370 247 187 468 414 Commercial real estate 177 151 769 135 312 Loans to individuals 2,882 2,219 1,349 1,460 991 Total recoveries 4,248 3,115 2,708 4,648 2,057 Net charge-offs 31,180 30,152 7,137 8,410 17,193 Provision charged to expense 32,368 7,106 17,521 (377) 53,472 Balance, end of year $ 118,906 $ 117,718 $ 102,906 $ 92,522 $ 101,309 Ratios: Net charge-offs as a percentage of average loans and leases outstanding 0.35 % 0.35 % 0.10 % 0.12 % 0.26 % Allowance for credit losses as a percentage of end-of-period loans and leases outstanding 1.32 % 1.31 % 1.35 % 1.35 % 1.50 % 39 Table of Contents Noninterest Income The components of noninterest income for each year in the three-year period ended December 31 are as follows: 2024 compared to 2023 2024 2023 2022 $ Change % Change (dollars in thousands) Noninterest Income: Trust income $ 11,821 $ 10,516 $ 10,518 $ 1,305 12 % Service charges on deposit accounts 22,518 21,437 19,641 1,081 5 Insurance and retail brokerage commissions 11,546 10,929 9,968 617 6 Income from bank owned life insurance 6,361 4,875 5,459 1,486 30 Card-related interchange income 21,887 28,640 27,603 (6,753) (24) Swap fee income 885 1,519 4,685 (634) (42) Other income 9,135 8,087 9,152 1,048 13 Subtotal 84,153 86,003 87,026 (1,850) (2) Net securities (losses) gains (5,446) (103) 2 (5,343) 5,187 Gain on VISA exchange 5,664 — — 5,664 100 Gain on sale of mortgage loans 5,795 3,951 5,276 1,844 47 Gain on sale of other loans and assets 9,111 6,744 6,036 2,367 35 Derivative mark to market (46) 14 368 (60) (429) Total noninterest income $ 99,231 $ 96,609 $ 98,708 $ 2,622 3 % Noninterest income, excluding net securities (losses) gains, gain on VISA exchange, gain on sale of mortgage loans, gain on sale of other loans and assets and the derivatives mark to market, decreased $1.9 million, or 2%, in 2024.
Uninsured amounts are estimated based on known deposit account relationships for each depositor and insurance guidelines provided by the FDIC. Short-Term Borrowings and Long-Term Debt Short-term borrowings increased $225.1 million, or 60%, from $372.7 million at December 31, 2022 to $597.8 million at December 31, 2023, primarily to fund loan and investment portfolio growth.
Uninsured amounts are estimated based on known deposit account relationships for each depositor and insurance guidelines provided by the FDIC. Short-Term Borrowings and Long-Term Debt Short-term borrowings decreased $517.7 million, or 87%, from $597.8 million at December 31, 2023 to $80.1 million at December 31, 2024.
Management considers a number of factors in evaluating the acquisition-date fair value including the remaining life of the acquired loans, delinquency status, estimated prepayments, internal risk grade, estimated value of the underlying collateral and interest rate environment. 32 Table of Contents Selected Financial Information The following table provides selected financial information for the periods ended December 31, 2023 2022 2021 2020 2019 (dollars in thousands, except share data) Interest income $ 529,998 $ 329,953 $ 293,838 $ 301,209 $ 325,264 Interest expense 144,322 17,732 15,297 32,938 55,402 Net interest income 385,676 312,221 278,541 268,271 269,862 Provision for credit losses 14,813 21,106 (1,376) 56,718 14,533 Net interest income after provision for credit losses 370,863 291,115 279,917 211,553 255,329 Net securities gains (losses) (103) 2 16 70 22 Other income 96,712 98,706 106,741 94,406 85,463 Other expenses 269,917 229,638 213,857 215,826 209,965 Income before income taxes 197,555 160,185 172,817 90,203 130,849 Income tax provision 40,492 32,004 34,560 16,756 25,516 Net Income $ 157,063 $ 128,181 $ 138,257 $ 73,447 $ 105,333 Per Share Data—Basic Net Income $ 1.55 $ 1.37 $ 1.45 $ 0.75 $ 1.07 Dividends declared $ 0.495 $ 0.475 $ 0.455 $ 0.440 $ 0.400 Average shares outstanding 101,556,427 93,612,043 95,583,890 97,499,586 98,317,787 Per Share Data—Diluted Net Income $ 1.54 $ 1.37 $ 1.44 $ 0.75 $ 1.07 Average shares outstanding 101,822,201 93,887,447 95,840,285 97,758,965 98,588,164 At End of Period Total assets $ 11,459,488 $ 9,805,666 $ 9,545,093 $ 9,068,104 $ 8,308,773 Investment securities 1,490,866 1,250,237 1,595,529 1,205,294 1,256,176 Loans and leases, net of unearned income 8,968,761 7,642,143 6,839,230 6,761,183 6,189,148 Allowance for credit losses 117,718 102,906 92,522 101,309 51,637 Deposits 9,192,309 8,005,469 7,982,498 7,438,666 6,677,615 Short-term borrowings 597,835 372,694 138,315 117,373 201,853 Subordinated debentures 177,741 170,937 170,775 170,612 170,450 Other long-term debt 4,122 4,862 5,573 56,258 56,917 Shareholders’ equity 1,314,274 1,052,074 1,109,372 1,068,617 1,055,665 Key Ratios Return on average assets 1.42 % 1.34 % 1.47 % 0.82 % 1.31 % Return on average equity 12.80 11.99 12.55 6.82 10.32 Net loans to deposits ratio 96.29 94.18 84.52 89.53 91.91 Dividends per share as a percent of net income per share 31.94 34.67 31.38 58.67 37.38 Average equity to average assets ratio 11.06 11.16 11.72 12.00 12.71 Results for 2020 through 2023 reflect accounting for the allowance for credit losses under the current expected credit loss methodology, while results prior to 2020 reflect accounting under the incurred methodology.
The sensitivity of estimated prepayment speeds had the largest impact on the residential first lien loan pool. 32 Table of Contents Selected Financial Information The following table provides selected financial information for the periods ended December 31, 2024 2023 2022 2021 2020 (dollars in thousands, except share data) Interest income $ 600,463 $ 529,998 $ 329,953 $ 293,838 $ 301,209 Interest expense 221,571 144,322 17,732 15,297 32,938 Net interest income 378,892 385,676 312,221 278,541 268,271 Provision for credit losses 29,170 14,813 21,106 (1,376) 56,718 Net interest income after provision for credit losses 349,722 370,863 291,115 279,917 211,553 Net securities gains (losses) (5,446) (103) 2 16 70 Other income 104,677 96,712 98,706 106,741 94,406 Other expenses 270,745 269,917 229,638 213,857 215,826 Income before income taxes 178,208 197,555 160,185 172,817 90,203 Income tax provision 35,636 40,492 32,004 34,560 16,756 Net Income $ 142,572 $ 157,063 $ 128,181 $ 138,257 $ 73,447 Per Share Data—Basic Net Income $ 1.40 $ 1.55 $ 1.37 $ 1.45 $ 0.75 Dividends declared $ 0.515 $ 0.495 $ 0.475 $ 0.455 $ 0.440 Average shares outstanding 101,913,111 101,556,427 93,612,043 95,583,890 97,499,586 Per Share Data—Diluted Net Income $ 1.39 $ 1.54 $ 1.37 $ 1.44 $ 0.75 Average shares outstanding 102,205,497 101,822,201 93,887,447 95,840,285 97,758,965 At End of Period Total assets $ 11,584,936 $ 11,459,488 $ 9,805,666 $ 9,545,093 $ 9,068,104 Investment securities 1,584,216 1,490,866 1,250,237 1,595,529 1,205,294 Loans and leases, net of unearned income 8,983,754 8,968,761 7,642,143 6,839,230 6,761,183 Allowance for credit losses 118,906 117,718 102,906 92,522 101,309 Deposits 9,678,019 9,192,309 8,005,469 7,982,498 7,438,666 Short-term borrowings 80,139 597,835 372,694 138,315 117,373 Subordinated debentures 128,305 177,741 170,937 170,775 170,612 Other long-term debt 130,353 4,122 4,862 5,573 56,258 Shareholders’ equity 1,405,165 1,314,274 1,052,074 1,109,372 1,068,617 Key Ratios Return on average assets 1.22 % 1.42 % 1.34 % 1.47 % 0.82 % Return on average equity 10.44 12.80 11.99 12.55 6.82 Net loans to deposits ratio 91.60 96.29 94.18 84.52 89.53 Dividends per share as a percent of net income per share 36.79 31.94 34.67 31.38 58.67 Average equity to average assets ratio 11.72 11.06 11.16 11.72 12.00 Results of Operations—2024 Compared to 2023 Net Income Net income for 2024 was $142.6 million, or $1.39 per diluted share, as compared to net income of $157.1 million, or $1.54 per diluted share in 2023.
Net interest income change (12 months) for basis point movements of: -200 -100 +100 +200 (dollars in thousands) December 31, 2023 ($) $ (9,867) $ (4,504) $ 6,215 $ 11,091 December 31, 2023 (%) (2.53) % (1.16) % 1.59 % 2.84 % December 31, 2022 ($) $ (11,973) $ (5,486) $ 5,902 $ 11,413 December 31, 2022 (%) (3.12) % (1.43) % 1.54 % 2.98 % The following table represents the potential sensitivity of our annual net interest income to immediate changes in interest rates as compared to if rates remained unchanged, assuming there are no changes in balance sheet categories.
Net interest income change (12 months) for basis point movements of: -200 -100 +100 +200 (dollars in thousands) December 31, 2024 ($) $ (8,351) $ (4,213) $ 5,101 $ 9,080 December 31, 2024 (%) (2.07) % (1.05) % 1.27 % 2.25 % December 31, 2023 ($) $ (9,867) $ (4,504) $ 6,215 $ 11,091 December 31, 2023 (%) (2.53) % (1.16) % 1.59 % 2.84 % The following table represents the potential sensitivity of our annual net interest income to immediate changes in interest rates versus if rates remained unchanged and there are no changes in balance sheet categories.
Income Tax The provision for income taxes of $40.5 million in 2023 reflects an increase of $8.5 million compared to the provision for income taxes in 2022, as a result of a $37.4 million increase in the level of income before taxes. The effective tax rate was 20.5% and 20.0% for tax expense in 2023 and 2022, respectively.
Income Tax The provision for income taxes of $35.6 million in 2024 reflects a decrease of $4.9 million compared to the provision for income taxes in 2023 as a result of a $19.3 million decrease in the level of income before taxes. The effective tax rate was 20.0% and 20.5% for tax expense in 2024 and 2023, respectively.
The following table reconciles interest income in the Consolidated Statements of Income to net interest income adjusted to a fully taxable equivalent basis for the periods presented: For the Years Ended December 31, 2023 2022 2021 (dollars in thousands) Interest income per Consolidated Statements of Income $ 529,998 $ 329,953 $ 293,838 Adjustment to fully taxable equivalent basis 1,237 1,049 1,100 Interest income adjusted to fully taxable equivalent basis (non-GAAP) 531,235 331,002 294,938 Interest expense 144,322 17,732 15,297 Net interest income adjusted to fully taxable equivalent basis (non-GAAP) $ 386,913 $ 313,270 $ 279,641 35 Table of Contents The following table provides information regarding the average balances and yields or rates on interest-earning assets and interest-bearing liabilities for the periods ended December 31: Average Balance Sheets and Net Interest Analysis 2023 2022 2021 Average Balance Income / Expense (a) Yield or Rate Average Balance Income / Expense (a) Yield or Rate Average Balance Income / Expense (a) Yield or Rate (dollars in thousands) Assets Interest-earning assets: Interest-bearing deposits with banks $ 176,146 $ 9,491 5.39 % $ 188,370 $ 1,722 0.91 % $ 317,493 $ 400 0.13 % Tax-free investment securities 21,485 578 2.69 23,060 606 2.63 28,139 753 2.68 Taxable investment securities 1,239,369 29,340 2.37 1,355,836 25,545 1.88 1,463,785 25,244 1.72 Loans and leases, net of unearned income (b)(c)(e) 8,714,770 491,826 5.64 7,172,624 303,129 4.23 6,777,192 268,541 3.96 Total interest-earning assets 10,151,770 531,235 5.23 8,739,890 331,002 3.79 8,586,609 294,938 3.43 Noninterest-earning assets: Cash 112,157 111,554 94,949 Allowance for credit losses (132,046) (94,912) (101,399) Other assets 959,972 818,701 813,905 Total noninterest-earning assets 940,083 835,343 807,455 Total Assets $ 11,091,853 $ 9,575,233 $ 9,394,064 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing demand deposits (d) $ 1,959,595 $ 25,652 1.31 % $ 1,596,197 $ 1,376 0.09 % $ 1,529,697 $ 434 0.03 % Savings deposits (d) 3,548,587 54,847 1.55 3,374,638 4,145 0.12 3,282,307 3,111 0.09 Time deposits 972,735 31,907 3.28 352,622 1,193 0.34 449,452 2,204 0.49 Short-term borrowings 439,556 21,747 4.95 144,834 1,999 1.38 119,801 99 0.08 Long-term debt 186,687 10,169 5.45 181,724 9,019 4.96 200,961 9,449 4.70 Total interest-bearing liabilities 7,107,160 144,322 2.03 5,650,015 17,732 0.31 5,582,218 15,297 0.27 Noninterest-bearing liabilities and shareholders’ equity: Noninterest-bearing demand deposits (d) 2,552,596 2,708,580 2,580,460 Other liabilities 205,224 147,871 130,007 Shareholders’ equity 1,226,873 1,068,767 1,101,379 Total noninterest-bearing funding sources 3,984,693 3,925,218 3,811,846 Total Liabilities and Shareholders’ Equity $ 11,091,853 $ 9,575,233 $ 9,394,064 Net Interest Income and Net Yield on Interest-Earning Assets $ 386,913 3.81 % $ 313,270 3.58 % $ 279,641 3.26 % (a) Income on interest-earning assets has been computed on a fully taxable equivalent basis using the federal income tax statutory rate of 21%.
The following table reconciles interest income in the Consolidated Statements of Income to net interest income adjusted to a fully taxable equivalent basis for the periods presented: For the Years Ended December 31, 2024 2023 2022 (dollars in thousands) Interest income per Consolidated Statements of Income $ 600,463 $ 529,998 $ 329,953 Adjustment to fully taxable equivalent basis 1,347 1,237 1,049 Interest income adjusted to fully taxable equivalent basis (non-GAAP) 601,810 531,235 331,002 Interest expense 221,571 144,322 17,732 Net interest income adjusted to fully taxable equivalent basis (non-GAAP) $ 380,239 $ 386,913 $ 313,270 35 Table of Contents The following table provides information regarding the average balances and yields or rates on interest-earning assets and interest-bearing liabilities for the periods ended December 31: Average Balance Sheets and Net Interest Analysis 2024 2023 2022 Average Balance Income / Expense (a) Yield or Rate Average Balance Income / Expense (a) Yield or Rate Average Balance Income / Expense (a) Yield or Rate (dollars in thousands) Assets Interest-earning assets: Interest-bearing deposits with banks $ 164,339 $ 9,071 5.52 % $ 176,146 $ 9,491 5.39 % $ 188,370 $ 1,722 0.91 % Tax-free investment securities 19,965 530 2.65 21,485 578 2.69 23,060 606 2.63 Taxable investment securities 1,516,847 49,688 3.28 1,239,369 29,340 2.37 1,355,836 25,545 1.88 Loans and leases, net of unearned income (b)(c)(e) 9,013,742 542,521 6.02 8,714,770 491,826 5.64 7,172,624 303,129 4.23 Total interest-earning assets 10,714,893 601,810 5.62 10,151,770 531,235 5.23 8,739,890 331,002 3.79 Noninterest-earning assets: Cash 111,997 112,157 111,554 Allowance for credit losses (122,867) (132,046) (94,912) Other assets 950,943 959,972 818,701 Total noninterest-earning assets 940,073 940,083 835,343 Total Assets $ 11,654,966 $ 11,091,853 $ 9,575,233 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing demand deposits (d) $ 1,907,627 $ 34,155 1.79 % $ 1,959,595 $ 25,652 1.31 % $ 1,596,197 $ 1,376 0.09 % Savings deposits (d) 3,728,926 89,852 2.41 3,548,587 54,847 1.55 3,374,638 4,145 0.12 Time deposits 1,549,999 67,025 4.32 972,735 31,907 3.28 352,622 1,193 0.34 Short-term borrowings 444,453 20,439 4.60 439,556 21,747 4.95 144,834 1,999 1.38 Long-term debt 186,550 10,100 5.41 186,687 10,169 5.45 181,724 9,019 4.96 Total interest-bearing liabilities 7,817,555 221,571 2.83 7,107,160 144,322 2.03 5,650,015 17,732 0.31 Noninterest-bearing liabilities and shareholders’ equity: Noninterest-bearing demand deposits (d) 2,298,065 2,552,596 2,708,580 Other liabilities 173,426 205,224 147,871 Shareholders’ equity 1,365,920 1,226,873 1,068,767 Total noninterest-bearing funding sources 3,837,411 3,984,693 3,925,218 Total Liabilities and Shareholders’ Equity $ 11,654,966 $ 11,091,853 $ 9,575,233 Net Interest Income and Net Yield on Interest-Earning Assets $ 380,239 3.55 % $ 386,913 3.81 % $ 313,270 3.58 % (a) Income on interest-earning assets has been computed on a fully taxable equivalent basis using the federal income tax statutory rate of 21%.
Net interest income, on a fully taxable equivalent basis, was $386.9 million for the year-ended December 31, 2023, a $73.6 million, or 24%, increase compared to $313.3 million for the same period in 2022. The net interest margin, on a fully taxable equivalent basis, increased 23 basis points to 3.81% in 2023 from 3.58% in 2022.
Net interest income, on a fully taxable equivalent basis, was $380.2 million for the year-ended December 31, 2024, a $6.7 million, or 2%, decrease compared to $386.9 million for the same period in 2023. The net interest margin, on a fully taxable equivalent basis, decreased 26 basis points to 3.55% in 2024 from 3.81% in 2023.
Higher levels of interest-earning assets resulted in an increase of $62.9 million in interest income, and changes in the volume and mix of interest-bearing liabilities increased interest expense by $7.0 million, primarily due to increases in short-term borrowings and time deposits.
Higher levels of interest-earning assets resulted in an increase of $22.8 million in interest income, and changes in the volume and mix of interest-bearing liabilities increased interest expense by $21.3 million, primarily due to growth in time and savings deposits.
(e) Includes held for sale loans. 36 Table of Contents The following table sets forth certain information regarding changes in net interest income attributable to changes in the volume of interest-earning assets and interest-bearing liabilities and changes in the rates for the periods indicated: Analysis of Year-to-Year Changes in Net Interest Income 2023 Change from 2022 2022 Change from 2021 Total Change Change Due To Volume Change Due To Rate (a) Total Change Change Due To Volume Change Due To Rate (a) (dollars in thousands) Interest-earning assets: Interest-bearing deposits with banks $ 7,769 $ (111) $ 7,880 $ 1,322 $ (168) $ 1,490 Tax-free investment securities (28) (41) 13 (147) (136) (11) Taxable investment securities 3,795 (2,190) 5,985 301 (1,857) 2,158 Loans and leases 188,697 65,233 123,464 34,588 15,659 18,929 Total interest income (b) 200,233 62,891 137,342 36,064 13,498 22,566 Interest-bearing liabilities: Interest-bearing demand deposits 24,276 327 23,949 942 20 922 Savings deposits 50,702 209 50,493 1,034 83 951 Time deposits 30,714 2,108 28,606 (1,011) (474) (537) Short-term borrowings 19,748 4,067 15,681 1,900 20 1,880 Long-term debt 1,150 246 904 (430) (904) 474 Total interest expense 126,590 6,957 119,633 2,435 (1,255) 3,690 Net interest income $ 73,643 $ 55,934 $ 17,709 $ 33,629 $ 14,753 $ 18,876 (a) Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to rate variances.
(e) Includes held for sale loans. 36 Table of Contents The following table sets forth certain information regarding changes in net interest income attributable to changes in the volume of interest-earning assets and interest-bearing liabilities and changes in the rates for the periods indicated: Analysis of Year-to-Year Changes in Net Interest Income 2024 Change from 2023 2023 Change from 2022 Total Change Change Due To Volume Change Due To Rate (a) Total Change Change Due To Volume Change Due To Rate (a) (dollars in thousands) Interest-earning assets: Interest-bearing deposits with banks $ (420) $ (636) $ 216 $ 7,769 $ (111) $ 7,880 Tax-free investment securities (48) (41) (7) (28) (41) 13 Taxable investment securities 20,348 6,576 13,772 3,795 (2,190) 5,985 Loans and leases 50,695 16,862 33,833 188,697 65,233 123,464 Total interest income (b) 70,575 22,761 47,814 200,233 62,891 137,342 Interest-bearing liabilities: Interest-bearing demand deposits 8,503 (681) 9,184 24,276 327 23,949 Savings deposits 35,005 2,795 32,210 50,702 209 50,493 Time deposits 35,118 18,934 16,184 30,714 2,108 28,606 Short-term borrowings (1,308) 242 (1,550) 19,748 4,067 15,681 Long-term debt (69) (7) (62) 1,150 246 904 Total interest expense 77,249 21,283 55,966 126,590 6,957 119,633 Net interest income $ (6,674) $ 1,478 $ (8,152) $ 73,643 $ 55,934 $ 17,709 (a) Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to rate variances.
Net charge-offs were $30.2 million for the year ended December 31, 2023 compared to $7.1 million for the same period in 2022, an increase of $23.0 million. During 2023, $17.0 million in charge-offs were recognized related to loans acquired through the Centric acquisition.
Net charge-offs were $31.2 million for the year ended December 31, 2024 compared to $30.2 million for the same period in 2023, an increase of $1.0 million.
The provision expense for loans to individuals was also impacted by growth in the portfolio of $60.0 million. 37 Table of Contents The table below provides a breakout of the provision for credit losses by loan category for the years ended December 31: 2023 2022 Dollars Percentage Dollars Percentage (dollars in thousands) Commercial, financial, agricultural and other $ 1,148 17 % $ 6,524 37 % Time and demand (4,187) (59) 5,265 30 Commercial credit cards 35 1 234 1 Equipment finance 2,850 40 1,086 6 Time and demand other 2,450 35 (61) — Real estate construction (3,329) (47) 4,593 26 Construction other (1,285) (18) 3,073 17 Construction residential (2,044) (29) 1,520 9 Residential real estate 1,662 23 8,939 51 Residential first liens 1,588 22 7,396 42 Residential junior liens/home equity 74 1 1,543 9 Commercial real estate 2,511 35 (2,854) (16) Multifamily (241) (3) 1,165 7 Non-owner occupied 3,297 46 (6,918) (40) Owner occupied (545) (8) 2,899 17 Loans to individuals 5,114 72 319 2 Automobile and recreational vehicles 4,071 57 (721) (4) Consumer credit cards 163 2 327 2 Consumer other 880 13 713 4 Provision for credit losses on loans and leases $ 7,106 100 % $ 17,521 100 % Provision for credit losses - acquisition day 1 non-PCD 10,653 — Total provision for credit losses on loans and leases 17,759 17,521 Provision for off-balance sheet credit exposure (2,946) 3,585 Total provision for credit losses $ 14,813 $ 21,106 The allowance for credit losses was $117.7 million, or 1.31%, of total loans and leases outstanding at December 31, 2023, compared to $102.9 million, or 1.35%, at December 31, 2022.
The table below provides a breakout of the provision for credit losses by loan category for the years ended December 31: 2024 2023 Dollars Percentage Dollars Percentage (dollars in thousands) Commercial, financial, agricultural and other $ 15,834 49 % $ 1,148 17 % Time and demand 7,310 23 (4,187) (59) Commercial credit cards 149 1 35 1 Equipment finance 6,291 19 2,850 40 Time and demand other 2,084 6 2,450 35 Real estate construction (302) (1) (3,329) (47) Construction other 554 2 (1,285) (18) Construction residential (856) (3) (2,044) (29) Residential real estate (1,392) (4) 1,662 23 Residential first liens (1,194) (3) 1,588 22 Residential junior liens/home equity (198) (1) 74 1 Commercial real estate 11,662 36 2,511 35 Multifamily 198 1 (241) (3) Non-owner occupied 10,416 32 3,297 46 Owner occupied 1,048 3 (545) (8) Loans to individuals 6,566 20 5,114 72 Automobile and recreational vehicles 4,752 15 4,071 57 Consumer credit cards 301 1 163 2 Consumer other 1,513 4 880 13 Provision for credit losses on loans and leases $ 32,368 100 % $ 7,106 100 % Provision for credit losses - acquisition day 1 non-PCD — 10,653 Total provision for credit losses on loans and leases 32,368 17,759 Provision for off-balance sheet credit exposure (3,198) (2,946) Total provision for credit losses $ 29,170 $ 14,813 The allowance for credit losses was $118.9 million, or 1.32%, of total loans and leases outstanding at December 31, 2024, compared to $117.7 million, or 1.31%, at December 31, 2023.
This payment represents 21.0% of the nonperforming loans at December 31, 2023. The allowance for credit losses was $117.7 million at December 31, 2023 or 1.31% of loans outstanding, compared to $102.9 million, or 1.35% of loans outstanding, at December 31, 2022.
The allowance for credit losses was $118.9 million at December 31, 2024 or 1.32% of loans outstanding, compared to $117.7 million, or 1.31% of loans outstanding, at December 31, 2023.
Loans with variable or adjustable interest rates include approximately 15% tied to the prime interest rate, 20% tied to SOFR, 6% tied to Treasury rates, 5% tied to Federal Home Loan Bank rates, 3% tied to swap rates and 3% tied to BSBY.
Loans with variable or adjustable interest rates include approximately 27% tied to the prime interest rate, 50% tied to SOFR, 11% tied to Treasury rates, 10% tied to Federal Home Loan Bank rates.
The lower level of net free funds was primarily the result of lower noninterest-bearing demand deposits as customers became more rate sensitive in the increasing rate environment and an increase in noninterest-earning assets, largely due to the Centric acquisition.
The lower level of net free funds was primarily the result of lower noninterest-bearing demand deposits as customers became more rate sensitive.
The cost of short-term borrowings increased 357 basis points in comparison to the same period in the prior year. Average short-term borrowings increased by $294.7 million for the year ended December 31, 2023 compared to the same period in 2022.
Average short-term borrowings increased by $4.9 million for the year ended December 31, 2024 compared to the same period in 2023. Average long-term debt decreased $0.1 million, while the cost of long-term debt decreased by 4 basis points.
Time deposits of $250 thousand or more had remaining maturities as follows as of the end of each year in the two-year period ended December 31: 2023 2022 Amount % Amount % (dollars in thousands) 3 months or less $ 70,122 24 % $ 12,663 19 % Over 3 months through 6 months 62,981 22 11,886 18 Over 6 months through 12 months 107,144 37 14,675 23 Over 12 months 48,508 17 26,231 40 Total $ 288,755 100 % $ 65,455 100 % The estimated total amount of uninsured deposits was $2.5 billion and $2.1 billion at December 31, 2023 and 2022, respectively.
Time deposits of $250 thousand or more had remaining maturities as follows as of the end of each year in the two-year period ended December 31: 2024 2023 Amount % Amount % (dollars in thousands) 3 months or less $ 215,806 47 % $ 70,122 24 % Over 3 months through 6 months 101,101 22 62,981 22 Over 6 months through 12 months 125,863 27 107,144 37 Over 12 months 17,081 4 48,508 17 Total $ 459,851 100 % $ 288,755 100 % The estimated total amount of uninsured deposits was $2.6 billion and $2.5 billion at December 31, 2024 and 2023, respectively, of which $0.7 billion were secured by pledged investment securities or letters of credit at December 31, 2024 and 2023.
Other types of loans are typically placed in nonaccrual status when there is evidence of a significantly weakened financial condition or principal and interest is 90 days or more delinquent.
Other types of loans are typically placed in nonaccrual status when there is evidence of a significantly weakened financial condition or principal and interest is 90 days or more delinquent. Interest received on a nonaccrual loan is normally applied as a reduction to loan principal rather than interest income utilizing the cost recovery methodology of revenue recognition.
(b) Does not include provision for credit losses on loans and leases - acquisition day 1 non-PCD. Nonperforming loans increased $4.0 million to $39.5 million at December 31, 2023, compared to $35.5 million at December 31, 2022. The increase in nonperforming loans is primarily a result of $14.5 million in loans acquired from Centric.
(b) Does not include provision for credit losses on loans and leases - acquisition day 1 non-PCD. 45 Table of Contents Nonperforming loans increased $22.0 million to $61.5 million at December 31, 2024, compared to $39.5 million at December 31, 2023.
During 2023, the Company increased its liquidity by purchasing $473.3 million in letters of credit from the FHLB of Pittsburgh, which were then used to secure public deposits. This resulted in a similar amount of previously pledged securities becoming 49 Table of Contents unencumbered.
During 2024, the Company increased its liquidity by purchasing $85.2 million in letters of credit from the FHLB of Pittsburgh, which were then used to secure public deposits. This resulted in a similar amount of previously pledged securities becoming unencumbered. Refer to “Financial Condition” above for additional information concerning our deposits, loan portfolio, investment securities and borrowings.
Commercial real estate net charge-offs totaled $6.1 million primarily due to a $4.3 million charge-off recognized on one commercial real estate relationships and $1.9 million related to the Centric acquisition. Net charge-offs in the loans to individuals category totaled $5.0 million for 2023, primarily due to charge-offs of indirect auto loans.
Net charge-offs in the commercial, financial, agricultural and other category totaled $14.7 million, of which $7.0 million were related to the Centric acquisition. Commercial real estate net charge-offs totaled $8.5 million primarily due to a $5.4 million in charge-offs recognized on three commercial real estate relationships and $3.1 million related to the Centric acquisition.
Increase in the residential real estate category is due primarily to $222.2 million in loan growth. Net charge-offs related to loans to individuals were $5.0 million for the year ended December 31, 2023, including $3.8 million for indirect auto loans and $1.1 million related to other consumer loans.
Net charge-offs related to loans to individuals were $6.8 million for the year ended December 31, 2024, including $5.2 million for indirect auto loans and $1.2 million related to other consumer loans.
The increase in net income was the result of an increase of $73.5 million in net interest income and a $16.9 million decrease in provision for credit losses, excluding the $10.7 million in provision expense related to the day 1 33 Table of Contents adjustment on non-PCD loans acquired in the Centric acquisition.
Contributing to the decrease in net income was a $6.8 million decline in net interest income and a $14.4 million increase in provision for credit losses. Provision for credit losses in 2023 included $10.7 million related to the day 1 adjustment on non-PCD loans acquired in the Centric acquisition.
A loan is also placed in nonaccrual status 52 Table of Contents when, based on regulatory definitions, the loan is maintained on a “cash basis” due to the weakened financial condition of the borrower.
A loan is also placed in nonaccrual status when, based on regulatory definitions, the loan is maintained on a “cash basis” due to the weakened financial condition of the borrower. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due.
The following table summarizes the commercial real estate portfolio by type of property securing the credit as December 31: 2023 2022 Amount % Amount % (dollars in thousands) Land $ 3,180 0.1 % $ 1,981 0.1 % Residential 1-4 39,776 1.3 6,046 0.3 Industrial and Storage 456,759 15.0 327,342 13.5 Multifamily 597,262 19.6 403,113 16.6 Office 550,889 18.0 497,209 20.5 Healthcare 149,909 4.9 171,506 7.1 Student Housing 88,557 2.9 75,998 3.1 Retail 750,899 24.6 609,533 25.1 Hospitality 210,485 6.9 153,312 6.3 Specialty Use 192,570 6.3 174,644 7.2 Other 12,866 0.4 4,328 0.2 Total $ 3,053,152 100.0 % $ 2,425,012 100.0 % When calculating the allowance for credit losses the commercial real estate portfolio is segmented into three portfolio segments; multifamily, non-owner occupied and owner occupied.
The following table summarizes the commercial real estate portfolio by type of property securing the credit as of December 31: 2024 2023 Amount % Amount % (dollars in thousands) Land $ 4,495 0.1 % $ 3,180 0.1 % Residential 1-4 11,735 0.4 39,776 1.3 Industrial and storage 522,480 16.7 456,759 15.0 Multifamily 610,442 19.5 597,262 19.6 Office 533,216 17.1 550,889 18.0 Healthcare 153,609 4.9 149,909 4.9 Student housing 126,688 4.1 88,557 2.9 Retail 768,067 24.6 750,899 24.6 Hospitality 191,372 6.1 210,485 6.9 Specialty use 196,946 6.3 192,570 6.3 Other 5,654 0.2 12,866 0.4 Total $ 3,124,704 100.0 % $ 3,053,152 100.0 % 43 Table of Contents The following table represents our commercial real estate portfolio by type of property securing the credit as of December 31, 2024.
Provision expense for the commercial, financial, agricultural and other category was impacted by an increase of $1.8 million in provision expense related to the equipment finance portfolio, which accounted for $153.3 million of the $331.6 million growth in outstanding balances for this loan category.
Provision expense for the commercial, financial, agricultural and other category was $15.8 million in 2024 and was impacted by an increase of $11.5 million in provision expense related to time and demand loans and an increase of $3.4 million in provision expense related to the equipment finance portfolio.
Loan and Lease Portfolio Following is a summary of our loan and lease portfolio as of December 31: 2023 2022 2021 2020 2019 Amount % Amount % Amount % Amount % Amount % (dollars in thousands) Commercial, financial, agricultural and other $ 1,543,349 17 % $ 1,211,706 16 % $ 1,173,452 17 % $ 1,555,986 23 % $ 1,241,853 20 % Real estate construction 597,735 7 513,101 7 494,456 7 427,221 6 449,039 7 Residential real estate 2,416,876 27 2,194,669 29 1,920,250 28 1,750,592 26 1,681,362 27 Commercial real estate 3,053,152 34 2,425,012 31 2,251,097 33 2,211,569 33 2,117,519 34 Loans to individuals 1,357,649 15 1,297,655 17 999,975 15 815,815 12 699,375 12 Total loans and leases $ 8,968,761 100 % $ 7,642,143 100 % $ 6,839,230 100 % $ 6,761,183 100 % $ 6,189,148 100 % The following table shows a breakdown of our loan portfolio between loans originated and loans acquired through the Centric acquisition as of December 31, 2023: Originated Acquired (1) Total (dollars in thousands) Commercial, financial, agricultural and other $ 1,296,982 $ 246,367 $ 1,543,349 Real estate construction 516,620 $ 81,115 597,735 Residential real estate 2,328,360 $ 88,516 2,416,876 Commercial real estate 2,519,053 $ 534,099 3,053,152 Loans to individuals 1,356,986 $ 663 1,357,649 Total loans and leases $ 8,018,001 $ 950,760 $ 8,968,761 (1) Includes January 31, 2023 balance of loans acquired as part of the Centric acquisition plus day 1 gross up of PCD loans.
Loan and Lease Portfolio Following is a summary of our loan and lease portfolio as of December 31: 2024 2023 2022 2021 2020 Amount % Amount % Amount % Amount % Amount % (dollars in thousands) Commercial, financial, agricultural and other $ 1,677,989 19 % $ 1,543,349 17 % $ 1,211,706 16 % $ 1,173,452 17 % $ 1,555,986 23 % Real estate construction 483,384 5 597,735 7 513,101 7 494,456 7 427,221 6 Residential real estate 2,341,703 26 2,416,876 27 2,194,669 29 1,920,250 28 1,750,592 26 Commercial real estate 3,124,704 35 3,053,152 34 2,425,012 31 2,251,097 33 2,211,569 33 Loans to individuals 1,355,974 15 1,357,649 15 1,297,655 17 999,975 15 815,815 12 Total loans and leases $ 8,983,754 100 % $ 8,968,761 100 % $ 7,642,143 100 % $ 6,839,230 100 % $ 6,761,183 100 % The loan and lease portfolio totaled $9.0 billion as of December 31, 2024, reflecting growth of $15.0 million compared to December 31, 2023.
The provision for credit losses on loans and leases for 2023 totaled $14.8 million, including $10.7 million recognized as the day 1 non-PCD provision expense related to the Centric acquisition. Provision expense in 2023 was a decrease of $6.3 million compared to the $21.1 million provision recognized in 2022.
The provision for credit losses in 2024 totaled $29.2 million, reflecting an increase of $14.4 million compared to the $14.8 million provision recognized in 2023. Included in the provision expense for 2023 was $10.7 million in day 1 non-PCD expense related to the Centric acquisition.
ASU 2023-09 also requires greater detail about individual reconciling items in the rate reconciliation for those items that exceed a specified threshold.
ASU 2023-09 requires additional disclosure information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state and foreign income taxes. ASU 2023-09 also requires greater detail about individual reconciling items in the rate reconciliation for those items that exceed a specified threshold.
The estimated credit loss on these loans is evaluated by comparing the loan balance to the fair value of any underlying collateral and the present value of projected future cash flows. Losses are recognized when a loss is expected and the amount is reasonably estimable.
Nonperforming loans are closely monitored on an ongoing basis as part of our loan review and work-out process. The estimated credit loss on these loans is evaluated by comparing the loan balance to the fair value of any underlying collateral and the present value of projected future cash flows.
As of December 31, 2023, the outstanding balance of $31.1 million carried an average weighted rate of 4.07% and an average original term of 248 days. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks.
These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple certificates of deposit at other CDARS member banks.

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